M&M's tractor marketing mantra

The key lies in being customer-centric and innovative, says Murali Gopalan.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 20 Oct 2006 Views icon4300 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
M&M's tractor marketing mantra
"The fact that we have been leaders for the last two decades does not mean much. What is important is to be able to sustain it for the next two decades,” reiterates Gautam Nagwekar. The executive vice-president (marketing & sales) of Mahindra & Mahindra’s farm equipment sector knows what he is talking about.

Retailing tractors is not the easiest of jobs in a country where a section of farmers is still struggling to survive. The spates of suicides in Andhra Pradesh and Maharashtra are a chilling reminder of how difficult their lives can be. For the record, tractor penetration in the country is barely three percent. It is here that players like M&M have their tasks cut out in the tractor arena. Nagwekar is categorical that the past is no guarantee to the future especially when one looks at the way the world is changing. “It only means that there is extra responsibility on the entire team to retain leadership and keep improving the lead over the challengers,” he says.

Today, the market is fragmented with 16 players of which three are global names. This trio is not doing earth shattering business today but there is no reason why they will not bounce back in the future because they are just too formidable in the international scene.

“One needs to be careful and vigilant while constantly seeing what we can do differently to be able to improve the lead. Holding on to a 30 percent share in a fragmented market is not easy to sustain. It is going to pose a tremendous challenge to the entire team across the chain be it marketing, sales, manufacturing, R&D or sourcing,” Nagwekar says.

There has been some consolidation happening in the tractor industry (as in the TAFE buyout of Eicher) and there are chances that this could intensify in the future too. This, in turn, could bring about another challenge to M&M in leadership stakes. The company is, however, confident about rising to the occasion and has kicked off the process of putting key strategies in place.

“We clearly want to drive growth because it is the leader’s responsibility to keep expanding the market. If you look at the scenario today, there is really not much penetration being done. In the last three years, industry has done well with new users in the fold but 80-90 percent of our farmers are in the small and marginal category with less than five acres of land holding,” he adds.

Banks have relaxed lending conditions progressively over a period of time especially with the government’s renewed focus on agriculture. That has helped the industry grow but small farmers still cannot afford a tractor. As Nagwekar puts it, “It is not making the tractor available but the more important issue relates to economic viability of the farmer. The challenge is to make tractors simpler and more affordable and expand/create fortune at the bottom of the pyramid. There is a market at every price point and a role that the leader ought to play in making technology available, accessible and affordable to this consumer category.”

##### KEY IS AFFORDABILITY

This only means that it will be difficult for a farmer to pay Rs 30,000 or so annually for a conventional tractor especially when he is not able to generate enough income. He needs the wherewithal to make his farming more productive and if this does not work out, the next generation will not stay in this profession. What will happen as a result? There will be larger rural migration into towns and cities which, in turn, will not be able to deal with this large influx. The solution is to create prosperity in agriculture.

Whatever little is happening today in corporatisation of farming and creating jobs in agriculture (allied industries like food processing, warehousing, transportation etc) will be a big help. More money in the hands of the farmers will also allow him to buy better seeds and go in for mechanisation.

“We at M&M need to see how we can enlarge our role in the agriculture space beyond mechanisation. The key is to make products affordable and increase purchasing power too. If the two happen synergistically, then there is a case going forward. We alone cannot create purchasing power but must work with a network of agencies (including the government) to make this happen,” Nagwekar says.

An affordable product requires innovation and M&M is now in the process of introducing a versatile multi-utility tractor that can meet the farmer’s needs. In addition, there have been some interesting customer-centric innovations. “We realised, for instance, that there are many things that first time buyers need to know about a tractor in terms of operating it and getting the best out of the vehicle,” he adds.

The earlier system involved somebody from the dealership visiting the farmer and explaining these aspects. This human interface has been replaced with the installation process recorded in the form of a message on a chip. “We have it in all the regional languages and installers go with this contraption to the farmers’ houses. This can either be played loudly or used with headphones. Anything novel in a village is a social event and there is always a crowd who gather to see this. This means that the others watching this spectacle get an idea of a tractor and its features. This is internally called the ‘e-Installer’ and farmers find it useful,” Nagwekar says.

The idea is to enhance the technology quotient in the offering. Everything packaged around the product must give the farmer an impression of being part of a hi-tech scene and M&M, being the leader, has a responsibility here. The other customer-centric initiative is to do with service clinics. There is always a doctor on hand to check out the tractor owner’s health in terms of eyes, blood tests etc. The objective is to create more value to the customer and create a stronger emotional connect.

##### GIVING ADDITIONAL SERVICE

“After all, a tractor is a tractor but the value lies in giving the additional service. We are reaching out to customers in our own way and though our tractors may be similar to our competitors, it is not going be as easy for them to occupy the same space in the minds of the farmer,” he says.

In his view, innovation is not cost control but being able to deliver superior value and making it affordable to large sections of people. “If a product that is 40 percent cheaper still does 80 percent of the original, then that is innovation. By the end of the day, you need to have offerings that can meet the needs of the bottom end of the market. At the same time, it is vital to create value/superior technology to meet the rising aspirations of those farmers who want to move up,” Nagwekar explains.

By the end of the day, as he adds, it is important to deliver what the market wants and not what the manufacturer can produce. One must anticipate what is likely to happen instead of merely waiting for it to happen. He strongly believes that the only way a tractor can be economically viable to small and medium farmers is when they have utilities beyond agriculture applications. One of these is haulage (be it sand, stones etc) where he makes additional income.

At one level, the tractor market works on the same lines of the shampoo sachets which took the rural market by storm. According to Nagwekar, every product must have corresponding purchase power. The challenge is to bring down the brand value to a low unit price. What impacts the farmer’s income (which translates into purchasing power) is rainfall because 60 percent of this country is rain-dependent. A bad monsoon can wreak havoc as also a flood which could be worse because all his investments are washed out at one go.

“The challenge is to create within your offering the true competitive advantage like design, availability or service. We are probably the only company as of now which has put in place a call centre initiative for customer connect. Today, farmers in Tamil Nadu, Andhra Pradesh, Maharashtra, Karnataka etc can call into our service and register complaints with the call centre,” he says.

There is a link mechanism where customer data is fed and when he buys a tractor, there is a welcome call made to him. When he comes for service to a dealership, the information is fed back into the call centre and within a week, a call is made asking him his service experience.

The system has been working very well and farmers have been calling seeking specific information on a tractor. “This is what competitive advantage is all about and we need to think one step ahead in adding value. The idea is to get closer to the farmer and contribute to his prosperity,” he explains.
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