On a road less travelled

IIPM, GURGAON

They’ve just launched their premium hatchback Ritz. But deep within the Maruti Suzuki headquarters, the only discussion ruling the strategy war room is about the unexpected results that their new-found rural strategy has reaped. That, perhaps, is a key reason why they have suddenly decided to not withdraw the Maruti 800 from the market.
By Pawan Chabra

India’s largest auto behemoth, Maruti Suzuki has made a little known change in their marketing strategy. Last year, they set up a separate, well-oiled sales and marketing department for India’s hinterlands. Of the 15,000 sales executives working with Maruti Suzuki all over India today, almost 2500 are these newly-appointed Rural Dealership Sales Executives (RDSEs). Young, energetic and raring to make their individual mark on their corporate bosses sitting in New Delhi and elsewhere, these lads have managed to add up significant numbers to the overall sales figures of the company even in these tough times. So much so that sales in rural areas, which used to be around 3-4% of total sales till last year, are hovering close to 9% this fiscal.

Managing Director Shinzo Nakanishi cannot but help gloating. “We saw the slowdown hitting urban demand much before others did. So we immediately decided to expand our presence in the rural areas.” To say that the strategy has paid off will be an understatement. The decision made sense, especially as various estimates projected that only 19 out of every 1000 people in rural areas own a personal mode of transportation. Besides, even the availability of finance became difficult for urban customers due to a steep rise in interest rates. In contrast, customers do not normally depend on bank loans to buy cars in rural markets. No surprise then that Maruti Suzuki made a beeline for the high-growth hinterlands and surprised everybody with the booty they discovered, especially in Karnataka’s rural areas.

Apart from a strategic rural foray, the company also devised a planned approach to attract more corporate customers and from June last year, they also began specifically focusing on central government employees, relatively insulated from the downturn in the economy. What added to the appeal of central government babus and bankers as potential car buyers was the hefty arrears they had received, thanks to the recent 6th Pay Commission windfall. In the corporate segment too, Maruti has seen a growth of almost 60% plus in its sales. Another key strategy implemented late last year was to enhance the focus on PSU’s to finance cars.

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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