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With the evolution of customer buying patterns, vendors are changing their
business strategy to offer more non-IT products like MP3 players, digicams and
PDAs. Some are already gearing up their channel to make this shift to selling
convergence products, while others are setting a parallel channel in place.
Retail is passe’, conventional channels are going strong, cor-porate sales
is stronger than ever, so what’s new for vendors? The answer is lifestyle
products.
Sounds new? Not really. Most vendors have realized the importance of becoming
lifestyle brands in the eyes of consumers, rather than remain timid IT sellers.
The reasons to take this route are varied. Some ventured into this business
model to garner greater marketshare in the converged space between lifestyle
consumer electronics and IT gizmos. Others did this to entrench their brand with
the high-spending customer segment.
Irrespective of the reasons, most IT vendors have made or are making the
shift from traditional IT products to selling lifestyle products in unison.
The Converged Space
With the advent of convergence, the consumer electronics space and the
conventional IT vendors have seen the evolution of a customers as well. Buying
behavior has changed drastically. What used to be a pure techno-logy driven
buying pattern erst-while is now driven by lifestyle preferences. In fact, HCL
Infosystems had launched a Home Entertainment PC to target the living rooms of
users. Few other vendors have also tried this.
The elite class wants to buy technology that reflects their lifestyles.
Corporates demand ergonomic solutions. Children want software that can give them
an edge in games and education equally. To cater to all these buyer demands, IT
vendors have taken a second look at their sales strategy.
Samsung will be converging the marketing for its three divisions to increase
the efficacy of the department. This announcement came in close heels with the
Samsung’s announcement of changing its channel-driven IT sales strategy to tap
the lifestyle segment.
Armed with ‘Life Uncommon’ logo, Samsung will deploy lifestyle driven
sales positioning for its laptops, PC peripherals, digicams and MP3 players. LG
has followed the suit and plans to sell its laptops as lifestyle statements and
not as IT products.
This change translates into a new strategy that reduces the total marketing
expenditure, coupling effective usage of present distribution and sales
facilities and an united service structure in place.
The Retail Walk
The retail business can be termed as the road less traveled in the Indian
scenario. Most vendors and partners have burnt their fingers when the retail
boom took place. The reasons for the failure cane pegged to non-maturity of
Indian consumers, low PC penetration, business model of selling only
technology-driven products and high prices.
The landscape seems to have changed drastically. Now with about almost every
vendor worth his salt opening retail outlets that target not a niche segment but
a broad base of consumers right from home buyers to corporate segment, these
outlets have to ensure them mindshare if not marketshare.
Canon has decided to open about 250 retail outlets by the end of this year.
The reason is simple: low prices of its products have increased the impulse
buying manifold.
Another reason for retail outlets to gain the ground is the changing buying
behavior of the IT consumer. He is no longer a first time buyer and knows that
the price should equate the performance he is looking at. Yet another more
reason is the bridging price gap between channels sales and retail outlet sales.
Retails outlets now are not only aimed at selling only the specific buyers,
these outlets will contain a 360 degree buying experience, right from the
products to its consumables to the after-sales service.
Large Product Offerings
Organizations have transitioned from a technology-centric approach to
customer-centric approach. The product lineup is not based on the technological
inventions, but what the consumer needs. Based on the current demand and future
needs, new ven-dors are tuned to what their customer wants and not what they
have to offer.
The easiest way for these vendors is to make a discreet entry into the
customer’s living room. Life has become synonymous with IT, and vendors have
made sure that the new lifestyle has IT gizmos for every need a customer can
think of. Right from PDAs to MP3 players, consumers are hooked to IT enabled
gizmos to give a drive to their lifestyle.
Vendors have expanded their offerings not only vertically but also
horizontally. BenQ, Apple, Samsung, Casio, Umax, Creative have invested heavily
on their MP3 players. PDA offerings are not far off. Palm has come to India
directly, HP plans to bring its IPaqs and Jornado to India while Handspring is
already available in India. Table PCs were also launched keeping in mind the
utility and lifestyle symbol in mind.
Another reason for vendors to invest in a wide range of produ-cts is the
pervasiveness of IT in a common man’s life. KS Kim, President and CEO, Samsung
India Electronics says, "Samsung’s marketing will be consolidated in one
single division to synergize their strengths as IT has become all pervasive and
all three divisions will have a single marketing department."
This decision sums up the fact that target audiences are merging too. What
used to be disparate target audiences, are the same set of people who can buy
any or all of these lifestyle and IT products.
Even product specific companies are offering broad base of products that
appeals not only the pocket, but also the taste of the buyers. Canon has taken
to the new brigade of lifestyle driven sales with a theme of ’shoot, show and
share’. Alok Bharadwaj, Director and GM, Canon India says, "The new
multi-functionality, compactness, styling of our products reflect the changing
needs of today’s digital user and caters to their desire of seamlessly
integrating technology into their lifestyle."
On the same line, LG Electronics has also launched lifestyle inspired
products for the masses, which will utilize not only the conventional IT
channel, but also consumer durable outlets for its laptops and home segment PCs.
Further to this, it is not only the home segment that is demanding the
lifestyle inspired products. Even the enterprise segment and SMBs are asking for
lifestyle products that are visually appealing and ergonomically designed.
Shuchi Sarkar, Head Marketing (PSG), HP says that it is the SMB segment that
is also asking for lifestyle products at a recent launch of SMB initiatives.
"Definitions can change but the new generation of IT products are aimed at
becoming a part of life rather than being tech-savvy gizmos." Â
The Changing Face of The Channel
The channel has also changed tremendously due to these changes. The new
breed of partner looks at intelligent selling. Earlier a partner was concerned
most about volume driven sales. Now, he is looking at new ways to attract the
new breed of buyers.
Partners have equipped themselves with newer methods of
selling. They are wowing consumers with better shelf displays and smart selling.
Conventional IT channels is also changing.
Most vendors are also planning to realign their channel to
speed up sales and let partners move up the value chain. Shuchi states, "No
doubt due to the lifestyle products, eventually we might have to realign
partners to accommodate these new line of products."
She adds that the second time buyer is more charged up and
his demand are very different from the first time buyers. On the other hand,
Canon has already restructured its channel partner to develop synergies between
its IT, office automation and retail partners.
What might sound distant future, IT has become ubiquitous and
all pervasive. This has made the vendors conscious about the product lines and
the need to streamline the channel partners. With the lifestyle becoming a
quintessential factor for product sales, channels might have to give a second
look at their knowledge about the consumer buying behavior and sales strategies.
What's propelling lifestyle sales?
electronics: A mix breed of products, like MP3 players, have come to the market,
which fall under the purview of both IT products and consumer electronics
l Lower prices: With
lower price tags, IT buying has become an impulse purchase decision
l PC penetration: India
has now an installed base of 10 million PCs and the penetration is gaining in
the smaller cities
l Second time buyers:
With PC becoming a necessity, second time buyers are more educated about
purchases that suit their lives
l Design changes:
Ergonomics is gaining importance and a technically advanced gizmo has to be
sleek to become a hot product
l New market creation:
There is a completely new breed of consumers who buy from swanky malls and
vendors want to cater to this high-spending base
Impact on the channel
but do foresee a considerable amount of change in the selling strategy. Some
vendors, such as Canon, Samsung and LG, have decided to employ the consumer
durables channel to sell their products. This might herald some change in the
distributor model, with a common distributor for consumer electronics and IT
products. The channel too will evolve to become a mix of retail players who
offer end-to-end product offerings right from smart refrigerators to digital
home entertainment PCs.