Marketing Management Project Submission (IIMK-ePGP04)

2012-2013 Marketing Plan For Solar Water Heaters (SWH)

For V GUARD INDUSTRIES

By

GROUP 14Beena Vaheed (EPGP-04B-020)Jaison Chacko (EPGP-04B-034)Riyas P K (EPGP-04B-085)Sajan Jose (EPGP-04B-089)

Table of ContentsExecutive Summary.....................................................................................................................................3

Company History.........................................................................................................................................4

Brand/Product.............................................................................................................................................4

Situation Analysis........................................................................................................................................6

Strengths:................................................................................................................................................6

Weaknesses:............................................................................................................................................6

Opportunities:.........................................................................................................................................6

Threats:...................................................................................................................................................6

Business Objectives.....................................................................................................................................7

Marketing Objectives..................................................................................................................................7

Marketing Strategies...................................................................................................................................8

Segment profiles......................................................................................................................................9

Target Segment & rationale..................................................................................................................10

Market 1: Residential.........................................................................................................................10

Market 2: Industrial...........................................................................................................................10

Market 3: Hotels/Canteens................................................................................................................10

Marketing Mix...........................................................................................................................................11

Marketing Research...............................................................................................................................11

Product..................................................................................................................................................11

Price.......................................................................................................................................................11

Place......................................................................................................................................................12

Promotion..............................................................................................................................................12

Implementation.........................................................................................................................................13

Budget...................................................................................................................................................13

Activity Schedule...................................................................................................................................14

Financial Projections..................................................................................................................................14

Annexure...................................................................................................................................................15

N/A........................................................................................................................................................15

Sources of Information..............................................................................................................................15

Executive SummaryV-Guard is one of the growing industrial houses in Kerala engaged in the manufacturing and marketing of various electrical and electronic products, since 1977.

V-Guard started manufacturing/selling Solar Water Heaters(SWH) from 2002, recognizing the huge market need and potential it had in India. During 2010–11, India added about 0.35 GWth (0.5 million m2) of solar heat capacity for an estimated total of 2.8 GWth (3.97 million m2) at the end of January 2011.

To help accelerate the adoption of the SWH in Rural/Urban markets, the Ministry of New and Renewable Energy(MNRE), Govt. of India now operates a national-wide capital subsidy and soft loan schemes w.r.t SWH. The main instruments of policy at the state/city level are mandatory regulation for SWH for new residential and commercial buildings, municipal property tax, state subsidy in addition to the MNRE subsidy and electricity rebate.

This marketing report analyses the company (V-Guard), the SWH market and finally arriving at the annual marketing plan for the V-Guard SWH for 2012-13.

Due to the non-availability of the current marketing plan, we have included assumptions based on the discussions had with a couple of representatives from V-Guard. We are thankful for the kind cooperation extended to us by V-

Guard representatives (Mr. George Sleeba, Mr. Siju N.P. and Mr. John Sebastian), to help arrive at the Annual Marketing Plan (2012-13).

An evaluation of the company’s internal strengths and weaknesses and external opportunities and threats served as a foundation for this analysis and marketing plan. This plan focuses on the industry (and company’s) growth strategy, analyzing the marketing/business objectives, and the resultant strategies and the derived action plans (Marketing, Implementation, Sales Projections) for the same.

Company HistoryV Guard is one of the growing industrial houses in Kerala engaged in the manufacturing and marketing of various electrical and electronic products. The Business was set up by Mr. Kochouseph Chittilappily and commenced its operations in 1977 as an SSI unit with manufacturing and marketing of voltage stabilizers under the brand name “V-Guard”. Established with a capital of 1 lakhs rupees, two workers and an average production of 50 voltage stabilizers a month, the company has diversified into a multi-product company which now manufactures and markets Electronic Voltage Stabilizers, Monobloc, Jet, Submersible, Compressor pumps and Electric Motors, Insulated Electrical Cables (House Wiring, Industrial), Electric Storage & Instant Water Heaters, Solar Water Heaters, UPS, Electric Fans and is also in generation of Power in a small way.

The Products are not only well recognized in all the southern states of the country, mainly being Kerala, Tamil Nadu, Karnataka, and Andhra Pradesh but are also enjoying demand across India. This recognition arises out of the fact that consumers recognize the brand “V-Guard” because of its quality as well as its presence in the market for over thirty years. The Company presently has sixteen branches including its head office located in Cochin, spread across 12 states and the Union Territory of Delhi. It has recently ventured into states of Maharashtra, Haryana, Madhya Pradesh, Orissa, Himachal Pradesh, Chattisgarh, Uttar Pradesh and Gujarat.

The net sales of the Company for the first nine months ended rose to ` 715.96 crores, showing an increase of 42%, from net sales of ` 503.75 crores, achieved in the corresponding period of the previous year. And the company is targeting for more than 1000 crores sales in the next financial year.

The Promoters of the company have also ventured into business areas of amusement park, Fashion Accessories and BPO services by incorporating four entities namely Veega Holidays and Parks Pvt Limited, Wonderla

Holidays Private Limited, V-Star Creations Private Limited and Vintes Solutions Private Limited.

Brand/ProductA quality product from V-Guard, the name that's trusted by over 40 million customers for the past 34 years, V-Guard Solar Water Heaters have the latest technology to heat water using solar energy. Made from top-quality materials and durable components, V-Guard Solar Water Heaters have state-of-the-art Evacuated Tube Collector System that facilitates efficient absorption and utilization of solar energy at minimal heat loss.

The water is heated by way of natural convection (Thermo syphoning), using the Solar Energy absorbed. This process continues as long as the Sun shines, thereby giving you hot water in plenty without any electricity or fuel consumption. Moreover, there is a back-up heater for overcast days so that you can get hot water, uninterrupted, throughout the year.

Recognized by the Ministry of New and Renewable Energy, V-Guard Solar Water Heaters are totally pollution-free, eco-friendly and absolutely economical as they are said to save a substantial amount on electricity bills and fuel expenses. V-Guard Solar Water Heaters can be used for domestic as well as commercial purposes and are available in various capacities, and comes with a 5 year warranty and excellent after-sale service, made possible through the wide network of V-guard Service Centers located across the country.

The Company has two Solar water heater Plants-One at Chavadi near Coimbatore and the recently commissioned plant set up at the SIPCOT Special Economic Zone in Perundurai near Erode. The new plant was set up at a capex of Rs 10 crore on 35 acres of leased land. . The new facility rolls out solar water heaters which use polymer plastic tanks to reduce corrosion, instead of conventional steel tanks.

Market has seen growth increasing for the past 15 years with more than 20% CAGR seen in the last 4-5 years due to the following reasons. Despite the rapid growth, there is huge scope for growth of India’s Solar Water Heater Market which has been estimated to be around 2.5 million square meters. More than 50% of the Solar Water Heater Installations are concentrated in the states of Karnataka and Maharashtra. India receives very high solar insolation throughout the year making it ideal for Solar Water Heater Installations.

Most of the SWH systems are sold to residential installations more than 80%. Commercial establishments are still slow to adopt SWH. The penetration of SWH in India is still 10 times lower than that of China and shows huge growth potential. Around 1 million households in India have solar water heaters and the growth rate is around 20%.Assuming an average solar water heater system cost of around Rs 25000,,the total market size is expected to increase from 90 Crores to 600 crores in a few years time.

There are more than 100 manufacturers of Solar Water Heater Manufacturers that have been accredited by MNRE .There are no dominant solar water heater companies in India as the market is heavily fragmented. Provides a great opportunity for a company to come and win over the market through good quality and cost.

Although new technologies are opening new opportunities, the efficient use of energy still remains the basis of all new and sustainable energy concepts for the future. Hence this study, V- Guard is one of Kerala’s most trusted Brands and the only established Player in the Solar Water Heater segment in the State- this is the criteria for selection of the Brand.

Situation AnalysisA situation analysis details the context for a company’s marketing efforts. We take a close look at the internal and external factors that will influence the marketing strategy for 2012-13. The SWOT analysis combines the external and internal analysis to summarize the Strengths, Weaknesses, Opportunities and Threats for V-Guard Solar Water Heaters (SWH).

Strengths: Manufactures Evacuated Tube SWH (in addition to FPC). Well-Educated & Experienced Dealer Network, who are very much

familiar with V-Guard products (in South India) Focus on Innovation – Setting up Development centers to constantly

add value to the products and test them. Employee Motivation & Satisfaction. UNDP/GEF Global Solar Water Heating India Project – To accelerate

SWH adoption/usage.

Weaknesses: Does not have an established

presence in North India (Gujarat, Maharashtra, NCR etc.) which has huge potential for SWH.

Saturation in SWH market in South India.

Large number of unorganized vendors/players in Karnataka (biggest SWH market in India)

Opportunities: Huge under-served market in North &

West India. Solar thermal technologies hold significant promise for India with high

solar insulation of 4 6.5 kWh/m2 per day for an average of 280 sunny days.

Threats: Increase in raw material prices. Possibility of further increase in lending rates (for soft loans)

Business Objectives Increase SWH market share by 8-10%.

Marketing ObjectivesMarketing objectives should lead to sales. Currently, V-Guard is able to convert around 50% of potential customers through the ATL/BTL activities, and has around 97% customer satisfaction rates, based on company data.

Increase sales of existing products by 20%.o As of 2011-12, V-Guard has a turnover of around 26 crores registering a growth

of around 18% over the previous year’s turnover of around 22 crores.

o Going with a Business As Usual (BAU) scenario, we can assume that it is possible to achieve sales growth by 20%, and achieve at least 31-32 crores, keeping in mind that the South Indian market has more or less saturated.

Increase the Direct Marketing Associate (DMA) and Direct-Customer base by 30% (stretch goal – 50%)

o As of 2011-12, V-Guard has a total of around 250 DMAs in the country, and plans to add around 50 new DMAs per quarter.

Increased focus in North Indian States.o As of 2011-12, V-Guard has a very faint presence in North Indian States. V-

Guard plans to increase product awareness through more ATL (TV Ads, Newspaper) and BTL (Roadshows, Van Demos, Exhibitions, Loan Melas w/ Banks) activities, as the North Indian states (Gujarat, NCR, etc.) as the collector area (m2) is projected to increase by double in the next three years.

Marketing StrategiesThe Marketing Strategy outlines the game plan which we need to follow to help achieve the stated marketing objectives. Also, it is important to note that Solar Water Heater(SWH) penetration depends on the following parameters:

Climate Public Awareness Economic Viability Public Policies Credit Status/Culture Supply/Maintenance Conditions

The total installed collector area increased from 1,19,000 m2 in 1989 to 5,25,000 m2 in 20011; and to estimated 3.1 million m2 by December 2009.

Solar water heaters are also an integral part of the recently announced Jawaharlal Nehru National Solar Mission (JNNSM) of Government of India. The Mission targets to have 20 million m2 of Solar Water Heater collectors by the year 2022. (1 m2 = 50 lpd)

Household Size projection till 2022 (All India) – LBNL Study

The above study highlights the point that the average household(Urban/Rural) will have around 4-5 people. The 100 lpd SWH model is sufficient for the daily hot water usage for a rural household, and we might need to market the 150-200 lpd SWH model to the urban households.

In addition, it is also evident that the hotels/hospitals require less than 100 lpd for each room/bed. This provides the potential to start looking at hotels as another focus segment, for V-Guard for large installations (> 1000 lpd).

In 2009/2010, India has moved up to the top 5 nations in new SWH additions.

Segment profilesThe various segments which utilize Solar Water Heaters(SWH) in India are :

Residential Housing o Independento Apartment

Hotels/Canteens Hospitals Hostels/Other Establishments Industrial Segment

As each of these segments have different requirement needs, which call in for different products from the V-Guard SWH portfolio, it would be ideal for V-Guard to follow the “Selective Specialization” market selection to help diversify the firm’s risk.

Residential Hotels / Canteens

Industry

100-500 lpd

1000-3000 lpd

1000-5000 lpd

As the residential market is very much relying on the central/state subsidies to increase the adoption, there is no such constraint in the Industrial and Hotels/Canteens segment (having deep pockets), keeping in mind the huge savings potential they can avail to the Industry/Hotels/Canteens.

(e.g.) For a facility which prepares breakfast/lunch/dinner for approx 500 people, the Hotel/Canteen can save the cost of around 200 commercial LPG cylinders in a year. [ 6.5 Lakhs(3000 lpd) Vs 18 Lakhs/p.a.(LPG) ]

Target Segment & rationaleV-Guard initially targeted only the residential market(s), but needs to start focusing on other growth segments too.

Market 1: Residential Residential continues to be the largest sector, contributing to around 80% of the installations, across India. So, this market is key to ensure that helps to meet the sales objectives.

Though this segment is highly competitive due to a large number of small players, it is essential to be part of this market to support the overall business objective of increasing the V-Guard market share (in SWH) by 8-10%, but would have huge uptake potential once the right set of policies(aided by Govt. of India) are put in place.

Market 2: IndustrialIndustrial usage of SWH is projected to increase rapidly (next to residential) over the coming years, and with support from the Govt, the SWH usage (collector area) can rapidly increase, and increasing the profit share.

This segment has very little players, but has huge profit margins. And these markets also demand huge uptime and good service capabilities, which are the key strengths of V-Guard.

Market 3: Hotels/CanteensIndustrial usage of SWH is projected to increase rapidly (next to residential) over the coming years, and with support from the Govt, the SWH usage (collector area) can rapidly increase, and increasing the profit share.

Helps reduce the overall operational costs to provide hot water for cooking / dishwashing purposes. e.g. All hotels in Chattisgarh have solar water heating systems.

Marketing MixBased on the understanding of the different segments (to be targeted) and the variety of products under the SWH portfolio, it is strongly advised that V-Guard follows a product differentiation strategy and target the various SWH markets as mentioned in “Target Segment and Rationale”.

Marketing ResearchMarket research is basically the study of markets (or groups of people) we would like to sell the product (SWH) to. There are two types of market research:

Primary Research – Collecting new information to meet the specific needs of the company.

Secondary Research – Analyzing information that already has been gathered for another purpose, but pertaining to the same type of products/portfolio.

In this report, we have heavily relied on “Secondary Research” information, provided by various agencies like MNRE, REN, Greentech, UNDP, etc.

We now focus on the “4 Ps of marketing”, which is part of the Marketing Strategy.

ProductV- Guard solar water heaters (SWH) have many interesting/good features that provide various benefits to the end customer. Some of the key features/benefits are:

Feature Benefit Impact1 Using international Better performance than Customer Satisfaction

ETC technology FPAL systems2 18 Branches, 180

Distributors / Service Centers across India

Faster after sales service Customer Satisfaction

3 Ability to heat hard-water

Works better than FPAL systems

Customer Satisfaction

And V-Guard has different products for the residential and Industrial segments, catering to the customer’s needs.

PriceIn 2011-12, a conscious decision was made to penetrate the “Karnataka” market and other markets too like Coimbatore, Bengaluru, Mysore, Vijaywada, and Tirupathi. And this initiative was helpful in registering around 30+ % growth, amidst a competitive environment.

Now, in 2012-13, the focus is on Northern Indian states. Thus, V-Guard needs to have reduced pricing, to help capture the market from the unorganized sector SWH players, and also go in for Reduced Pricing.

PlaceTo increase the reach of V-Guard SWH in northern India markets, and also increase the growth on South Indian markets, it is recommended that V-Guard increase the number of Direct Marketing Associates (DMA).

Also, keeping in mind the overall growth potential of the SWH industry, V-Guard has already setup a new plant in South India to meet the increased demands(based on UNDP projections) from the market.

PromotionV-Guard currently has allocated around 4-5% of its revenue to marketing/promotions of the SWH products. The ATL(TV Ads, NewsPaper Ads) and BTL(Roadshows, Van Demos, Exhibitions, Loan Melas W/ Banks) activity needs to be increased to help develop product/brand awareness, and benefits (including cost savings) of using SWH at residences, hotels, and industries.

It is advisable that V-Guard works in close co-operation with MNRE/ANERT to help increase the adoption of SWH in India.

Also, V-Guard can start working with Panchayat bodies(in Rural regions) and Municipalities/Wards(in Urban regions) to help spread the awareness and adoption of SWH in residences and hotels/canteens.

ImplementationIn the financial year 2011-12, V-Guard earned around 26 crores from SWH sales, with special focus on Karnataka(one of the biggest SWH markets in India). The Advertisement budget was around 4-5%.

In 2012-13, it is recommended to have a minimum of 5% but stretch to around 8% allocated for the Advertisement budgets, primarily to help increase the DMAs and also increase ATL/BTL activities to spread awareness across North Indian states (primarily Maharashtra, one of the biggest SWH market in India). This should potentially help to increase the growth by around 20% (modest figure, considering the fact that V-Guard would be entering into new markets), and help increase the overall market share by focusing on not only residential but other segments such as Hotel/Canteens and Industrial Environments.

BudgetAssumptions:

1) Rs. 15,000 for a 10 second ad on a TV channel (once a day during prime-time).

2) Rs. 20,00,000 for developing new ads.3) Rs. 20,000 for a half-page ad on predominant rural/urban newspaper

(twice a month).

4) Rs. 50,000 for a Van Demo.5) Rs. 1,00,000 for Roadshows/Exhibitions.6) Rs. 50,000 for a Loan Melas w/Banks.

Of the projected Advertisement budgets, around 40%(80 lakhs) is to be targeted for running ATL activities.

Of the projected Advertisement budgets, around 50%(1 crore) is to be targeted for running BTL activities.

The remaining 10% is kept for handling administration expenses to run the ATL/BTL and also for training new DMA and dealers.

Activity ScheduleATL Activities:

- TV Ads : To be shown during prime-time, every day (for a max of 360 days

in a year). A total of 54 lakhs to be allocated for the same.

- NewsPaper Ads : To be displayed(half-page ads) once every week for 48 weeks.

BTL Activities:

- Van Demos : 5 Vans to be arranged to be run across rural/urban areas for 12 months.

- RoadShow/Exh : 5 roadshows/exhibitions every month. - Loan Melas : 5 such events planned for 6 months in the year.

We strongly feel that the ATL/BTL activities will help in product/brand re-calls when the customer goes ahead to purchase a SWH.

Financial ProjectionsOur target is to increase the net sales of SWH by 20%, by implementing the above mentioned marketing promotion activities.

AnnexureN/A

Sources of Information

1. MARKET ASSESSMENT OF SOLAR WATER HEATING SYSTEMS IN FIVE POTENTIAL STATES/NCR REGION – Greentech – Feb 2011

2. Strategic Plan for New and Renewable Energy Sector for period 2011-17 – MNRE – Feb 20113. Annual Report – V-Guard – 2010-114. Annual Report – V-Guard – 2009-105. Renewables 2011 – Global Status Report – REN21 – Sep 20116. Renewables 2010 – Global Status Report – REN21 – Sep 20107. TVJ, Apr 20118. DEVELOPMENT OF AN AREA BASED ENERGY SERVICE COMPANY (ESCO) MODEL FOR SOLAR

WATER HEATING IN INDIA – Mercados – Sep 2010