TURNING UP THE COOL Realising untapped potential in India’s room air-conditioning market

7/31/2019 TURNING UP THE COOL Realising untapped potential in Indias room air-conditioning market

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TURNING UP THE COOL

Realising untapped potential in Indias room air-conditioning market

TURNING UP THE COOL

Realising untapped potential in Indiasroom air-conditioning market


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TURNING UP THE COOL


Kanvic is a management consulting firm helping businesses develop

winning strategies, drive profitable growth and achieve operational

excellence to reap long lasting rewards in the fast growing Indian economy.

We work with C-level executives to develop innovative solutions for the

business challenges of 21st century India by bringing in leading edge

management thinking informed by in-depth research and sound analysis.


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TURNING UP THE COOL


TURNING UP THE COOLRealising untapped potential in Indias

room air-conditioning market

Deepak Sharma

Shiv Kumar Sharma

David Daniel-Sainteff

July 2012

kanvic.com


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About the Authors

Deepak Sharma is a partner and co-founder at Kanvic where he leads the strategy

practice. Shiv Kumar Sharma is an associate consultant and David Daniel-Sainteff is a

junior consultant in the strategy practice.

Acknowledgements

Kanvic would like to acknowledge the contribution of the team behind the report,

especially to Gehan Wanduragala and Vlad Flamind who provided editorial guidance.

Further information

We welcome your questions and comments on this report. For further information,

please contact us at:

Email: [email protected]

Phone: +91 99283 77800

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mailto:[email protected]:[email protected]


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Contents

Foreword 7

Executive Summary 8

The low penetration of AC in India 12

The paradigm shift in the room air-conditioning market

The huge market that remains largely untapped

Strategies for accelerating growth 19

Develop and communicate easy financing options

Innovate to reduce costs and satisfy customer needs

Develop customer-friendly communication

Improve the selling approach

Target new customer segments

Conclusion 38

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Foreword

Indias consumer durable industry has witnessed fast growth in recent years and it is

expected to grow at a similarly rapid rate for some time to come. However, Indias air-

conditioning industry has been something of a laggard compared to its peers. Despite

seemingly impressive headline growth rates, the penetration of room air-conditioners

remains strikingly low compared to other white goods, with a mere 3.8% of

households having adopted this product category.

In Turning Up The CoolKanvic sheds light on the cause of this low penetration rate

and shows the shift in demand that occurred from the commercial to the residential

segment. In so doing we can see how the industry has struggled to adapt to serve this

larger but more complex consumer market.

Whilst the long-term growth outlook for the air-conditioning sector remains positive,

the late onset of summer in 2012 has combined with an uncertain economic climate to

expose weaknesses in the industrys current approach. In a growing market sub-optimal strategies can survive for a time, but when they are buffeted by the chill wind

of an economic downturn, the entrance of new competitors or even the vagaries of the

weather, they are quickly blown away as a lot of hot air.

In this report we hope to provide the industry with practical strategy options that will

enable it to more quickly realise the untapped potential of Indias room air-

conditioning market.

Deepak Sharma

Director and co-founder

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Executive Summary

The air-conditioning market in India has witnessed rapid growth in recent times

thanks to the countrys strong economic performance, rising household incomes and a

favourable shift in consumer perceptions towards air-conditioners (AC). The markets

compounded annual growth rate (CAGR) has run at 17% over the last three years. In

2011-12 air-conditioning sales reached around Rs. 17,600 crore 1. However despite

this rapid growth air-conditioners have still only reached a mere 3.8%2 of Indian

households according to the most recent data. This low penetration rate illustrates the

huge opportunity the AC industry in India is yet to seize.

In recent years the Indian AC industry has been marked by a fundamental shift in the

source of demand for room air-conditioners. This shift has seen the bulk of sales move

away from the traditionally dominant commercial sector and toward the residential

sector, which now comprises 60% of the market. The AC industry in India has so far

failed to fully grasp the more complex needs and expectations of this newer, larger

and more diverse customer segment. This lack of understanding means that the AC

industry is behind the curve in areas from customer communication to easy financing.As a result, AC penetration in India lags behind other developing markets as well as

other categories of consumer durables in India.

This report highlights the current low penetration level of AC in India and develops a

number of effective strategies the industry could adopt to accelerate growth and

thereby increase penetration. These strategies relate to financing, innovation,

communication and the selling approach. All of these strategies will need to be

targeted appropriately to both existing and emerging customer segments:

To begin with, developing easy financing options for customers will bring air-

conditioners within reach of a much larger percentage of the population. At present

the high up-front costs of an AC are a major barrier to adoption for many Indian

households. By following in the tracks of the automobile industry and making

financing the established means of purchase, AC manufacturers will be able to

increase penetration and accelerate market growth. However, simply providing the

financing options is insufficient, the industry needs to communicate their availability

and affordability more effectively.

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1 AIACRA, Kanvic analysis

2 RAMA, Francis Kanoi, MarketLine, Businessworld - Marketing Whitebook 2010-11, Kanvic analysis


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Innovation will also play a central role in spurring industry growth if it focuses on

reducing the running cost of AC and increasing its benefits. Advances in technologywill help improve energy efficiency and therefore lower the currently high running

costs. This is particularly important in India where the traditional air-cooler offers a

cheaper substitute for households at a time when energy prices are rising.

Furthermore, by adding additional functions to air-conditioners like heating,

innovation can address the industrys problem of high seasonality by providing year-

round benefits, while keeping the price-performance ratio aligned with customers

expectations.

Simpler and more effective communication by AC companies will help customers

overcome their current doubts about air-conditioners. At present AC manufacturers

rely too heavily on industry jargon and exhaustive lists of technical features in their

customer communication. This fails to illuminate the real benefits the customer will

derive from their product and makes it difficult for them to compare different product

offerings.

Improving the selling approach will help manufacturers to engage more effectively

with the customer. In this area there are three major points for improvement:

customer education, solution-selling and cross-selling:

Firstly, customer education will improve the level of awareness of the benefits of AC

and help dispel existing customer concerns. However, customer education must not be

limited to sales staff. Any employee who comes into contact with the customer, for

example service staff, must be engaged in this process.

Secondly, adopting a solution-selling approach will unveil new ways to engage the

customer. Rather than focusing on selling a product, companies should diagnose the

customers problem and suggest the appropriate solution. For AC manufacturers this

could mean conducting home surveys to identify a customers air-conditioning

requirements.

Thirdly, cross-selling will allow air-conditioners to reach the larger number of

customers who have purchased other white goods. Many AC players also manufacture

other consumer durables, therefore they can use these existing sales and service

networks to identify the need for an AC and recommend a suitable product to the

customer.

To successfully implement all of these strategies AC manufacturers must have a

strong understanding of their customer segments. The AC market is becoming moreheterogeneous as new customer segments emerge. Industry players need to be aware

of these segments and their specific needs and wants, and they need to tailor their

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strategies in financing, innovation, communication and sales accordingly. In addition

to the established customer segments of price conscious and efficiency seeker, we

have identified two new segments of aesthetic design and health consciouscustomers that are beginning to shape the market.

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The low penetration of AC in India


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The paradigm shift in the room air-conditioning

market

The Indian air-conditioning market reached Rs. 17,600 crore in 2011-12, rising from

Rs. 11,000 crore in 2008-09 at a CAGR of 17%3. The room air-conditioning market

represents approximately 50% of the total market, with the other 50% comprised of

central and specialist air-conditioning systems. The room AC market can again be

divided into two sub-segments. On the one hand the residential segment which now

constitutes a majority 60% market share and on the other hand the commercialsegment which represents a smaller 40%4 (Exhibit 1).

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3AIACRA, Kanvic analysis

4Francis Kanoi


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The commercial segment consists of retail shops, hospitals, hotels, restaurants,

commercial offices and educational institutes, while the residential segment includes

those using air-conditioners for their houses and apartments. The commercialsegment formerly represented the lions share of the market for room AC

manufacturers but over the last decade demand has shifted toward the residential

segment. (Exhibit 2)

The faster rate of growth in the residential segment has been propelled by three key

growth drivers. Firstly, rapid growth in the stock of residential housing in India,

particularly the supply of multi-storey apartments and modern homes that has

dramatically increased the exploitable market for room ACs. In urban India around

3.85 crore new houses have come up in last 10 years from 2001 to 2011. Secondly,

increasing household income has brought a range of consumer durables including AC

within the reach of more consumers. Indias monthly household income has increased

by 14.7% in 2011 to Rs. 20,555 from Rs. 17,918 in the previous year6. Thirdly a

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5Housing, Household Amenities and Assets - Census of India

6 MarketLine, Kanvic analysis


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progressive shift in consumers perception of air-conditioners from that of a luxury to

a necessity is underway, as consumers become increasingly accustomed to air-

conditioned environments at the workplace and in their cars.

Meanwhile in the commercial segment the smaller amount of potential space to be air

conditioned and the increasing preference for central air-conditioning systems over

room air-conditioners has resulted in a lower growth rate. Thus, the market share of

the commercial segment halved from roughly 80% to 40% in 15 years, while the

residential segment has trebled from only 20% in 1995-96 to 60% in 20117.

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7Francis Kanoi, OEM update, Kanvic analysis


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A huge market remains largely untapped

In spite of the growing importance of the residential market, the overwhelming

majority of Indian homes are still untouched by air-conditioning with the overall

penetration rate standing at a mere 3.8% in 2010-11. This situation compares very

unfavourably with the scenario in other developing Asian economies. The penetration

of room air-conditioners is 8% in Indonesia, 50% in Korea, 53% in China, 72% in

Singapore and 89% in Taiwan8 (Exhibit 3).

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8Euromonitor, RAMA, Francis Kanoi, MarketLine, Kanvic analysis


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Closer to home, the wider Indian consumer durable sector is one of the countrys

fastest growing industries with a CAGR of about 15%. The industry is expected to

touch Rs.52,000 crore by 20159, fuelled by rising household incomes and increasingurbanisation.

However, in spite of this high growth trajectory, the penetration of air-conditioning will

still be significantly lower than the level of penetration other white goods have already

achieved today. Presently more than 77% of households in urban India have a TV,

33% have refrigerators, 17% have an air cooler and 13% own a washing machine10

(Exhibit 4).

Despite fierce competition and a sizeable market turnover in the room AC industry,

the fact that 97% of Indian households are still untouched by room air-conditioners -

while the adoption of comparable products have surged ahead - indicates that

industry players need to adapt their strategies to fully realise this opportunity.

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9ASSOCHAM Emerging trends in consumer electronics and durable industry

10Businessworld - The Marketing Whitebook 2010-11


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Strategies for accelerating growth


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Strategies for accelerating growth

To address the low level of room AC penetration in India, industry players should

adopt comprehensive strategies. Based on our research, we have identified five

promising axes of improvement (Exhibit 5) for the room air-conditioning industry. By

adopting effective strategies along these lines, the industry can reach out to target

customers to influence and strengthen their purchasing desire.

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1. Develop and communicate easy financing options

The average price of an air-conditioner in India is Rs 30,000. This is still substantially

more than the average monthly household income which currently stands at just Rs

20,555 (Exhibit 6). As a result air-conditioners remain unaffordable for a large part of

the population.

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Furthermore, the availability of cheaper substitutes like air-coolers renders air-

conditioners less attractive for the mass market. The price of an air cooler starts from

as low as Rs. 4,00011, far less than the average price of an air-conditioner. Thepenetration rate of air-coolers reached 17% in 201112, pointing out the high price

elasticity in the Indian consumer durables market.

Providing easy financing options can help address the issue of affordability. By

effectively boosting the purchasing power of a vast segment of consumers for whom

air-conditioning is currently out of reach, the industry can unleash a wave of untapped

demand. Realising this, most AC companies have recently introduced some easy

financing options for consumers, offering a specific low interest rate and an easy

payment process. For example, some manufacturers break the ticket price down into

easy monthly instalments (EMI) for credit card holders over a period of 10 to 12

months.

However, simply introducing such payment options is no longer sufficient. They need

to be conveyed to consumers through effective communication mediums. At outlets

and in advertising campaigns brands are not effectively communicating the available

financing options and consumers often have difficulty in obtaining the relevant

information.

The low level of sales finance is a challenge across the consumer durables sector, withfinancing contributing a mere 5-7% of total revenues13. By contrast, the automotive

industry has understood the leverage of financing options and it has quickly offered

them to customers in order to expand their market. In 2011 around 72%14 (Exhibit 7)

of cars purchased in India were bought on credit. Today, the possibility of buying a car

on credit is ingrained in the minds of consumers. Air-conditioning players should

follow this path, highlighting their financing options in their advertising campaigns to

appeal to the large number of consumers for whom the high up-front cost of an AC is

a major barrier to adoption.

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11Symphony Corporate Presentation

12Businessworld - The Marketing Whitebook, 2010-11

13 Press clippings

14Kotak Mahindra Prime


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Indeed, such financing options can effectively target the burgeoning middle and

upper-middle class consumer segments, which represent around 14%15 of the 242

million households in India (some 34 million households). These segments have the

growing desire and increasing means to improve their quality of life. Products like air-

conditioners that are designed to provide greater comfort appeal to the emerging

aspirations of these consumers and easy financing options will be an effective way to

convert these desires into actions.

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15NCAER, India census


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2. Innovate to reduce costs and satisfy customerneeds

Use technology to reduce the running costs of AC

Financing options will reduce the cost of the initial investment for consumers but the

operating costs of air-conditioners are a significant deterrent to purchasing. Many

customers prefer familiar substitutes like the air-cooler that have substantially lower

operating costs. The energy bill for an air-cooler with its simple fan and water pump

amounts to approximately Rs. 196 per month compared to Rs. 2,610 for an air-

conditioner (Exhibit 8). Nonetheless, new technology and innovation have the

potential to allow manufacturers to reduce costs and market affordable products to a

larger segment of the population.

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Due to the high price of energy in India, the operating costs of an AC represent a

significant hidden expense for households. To better inform consumers about AC

running costs, the Bureau of Energy Efficiency (BEE) has introduced a star ratingsystem for air-conditioners, highlighting the efficiency of products in terms of energy

consumption.

Driven by both regulation and market forces manufacturers are developing and

marketing technologies that decrease the consumption of electricity. For instance,

inverter technology avoids peaks of electricity consumption and significantly reduces

the running costs of the air-conditioner. But this existing technology is not sufficient to

compete with the energy consumption of the substitute products in India. Therefore

manufacturers should continue to prioritise energy efficiency and integrating new

renewable energy technology (see below) in their research and development.

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Regulation and innovation: the star rating system

This labelling programme classifies air-conditioners

according to their energy consumption. The Bureau of

Energy Efficiency (BEE) attributes between one and fivestars to products according to their Energy Efficiency Ratio

(EER). This star labelling enables consumers to understand

the consumption of each product. The five star AC consumes

the least energy while the one star consumes the most.

According to BEE, a one star air-conditioner consumes

roughly 31% more than a five-star product.

Mandatory since January 2010, the star rating system influences the purchasing

process of consumers who are willing to increase their initial investment in order to

reduce their electricity bill. This labelling system also shapes the manufacturers

strategies as they strive to offer a competitive range of products with high star

ratings.


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Develop products that deliver convenience to customers

Only a few brands have developed convenient technology with clear and explicitbenefits for the customer. For instance, Onida, an Indian company, has recently

marketed the first air-conditioner which can be operated from outside the home. The

user sends an SMS from their phone and the AC gets switched on, ensuring their

home is cool from the minute they enter. This innovation caters to the real problems

customers face and provides them with a clear benefit. Manufacturers have to develop

this convenience angle further by offering simple to use technology with clear

improvements for the customer. Furthermore, the technology used needs to match

the expectations of specific customer segments.

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Innovation at a glance: Solar AC

Solar powered air-conditioners could represent an efficient solution to reducing

AC running costs, especially in India. Most parts of the country have about

250-300 sunny days per year and regions such as Rajasthan are endowed with

some of the highest levels of solar radiance in the world. With major shortfalls

in power generation and poor grid connectivity, the forecast economic and

demographic growth will result in higher electricity prices. As a result

international developments in solar AC technology could have great potential

for the Indian market.

In this regard Ludivine Solar, a French

company, markets a hybrid solar air-conditioner

named Ultimate Blu Sun. The company claims it

cuts electricity costs by 60% during operation,

uses a non-polluting refrigerant, and decreases

emissions of carbon dioxide by as much as 20

kg per year.

Furthermore, in China, solar technology has

been applied to produce a fully autonomous AC.Gree Electric Appliances recently developed the

worlds first off-grid solar powered air-conditioning unit, running without any

emissions or mains power supply.


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Address seasonality concerns through year-round features

In addition to regarding air-conditioners as an expensive or luxury purchase, many

consumers consider AC as a highly seasonal product, pointing out the sizeable initial

investment for what may be a relatively brief benefit over two or three months of high

summer. Indias diverse climactic regions and the seasonal extremes within these

regions demand adapted technologies to extend the benefits of AC year-round. By

focusing on their products as an air-conditioning solution rather than a cooling device,

manufacturers can change the current perception of the product as a seasonal

purchase and overcome a limiting factor on industry growth.

In this vein LG has developed a line of reversible spilt ACs which include a heatingoption. This technology allows consumers to use their air-conditioner during summer

and the winter. Other manufacturers have also included a de-humidifier function for

use during the monsoon season. Furthermore increasing health concerns around

pollution, allergens and airborne bacteria offer yet further opportunities for players to

increase the benefits of their product and diminish the seasonality factor.

While year-round functionality offers clear advantages to the customer, manufacturers

need to ensure that their efforts in innovation are equally focused on delivering these

new products at an acceptable price-performance ratio for the target customers.

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3. Develop customer-friendly communication

Remove the jargon

Room air-conditioners are now primarily aimed at ordinary consumers rather than

businesses, but many manufacturers are still using technical language to explain their

features (Exhibit 9). Indeed the information about AC products is not provided in

terms of benefits for the consumer but often in technical jargon that is

incomprehensible for the larger part of the population.

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For instance, one companys brochure - which is typical for the industry - refers to the

MCC option, the BLDC compressorand UTR technology. None of these terms enable

the consumer to clearly understand the benefits embedded within the product. Plus, ifthe customer decides to seek information directly online or in a brick-and-mortar

store, they will have to compare the available products. However, the complex

technical charts that are habitually used to highlight obscure performance data and

technical characteristics that make comparison difficult and time consuming.

AC manufacturers should assume the perspective of their target customer rather than

the perspective of their engineering teams to produce informative but jargon-free

marketing material. For example, when referring to the noise level they could

compare it to everyday products the consumer will be familiar and comfortable with -

like a ceiling fan - rather than in decibels.

Focus on benefits not features

Manufacturers should market their products keeping in mind the language and the

expectations of their consumers. Consumers do not seek a long list of features but

concrete benefits which bring them solutions to improve their quality of life. Instead of

highlighting numerous features, AC players should clearly define the benefits the

product provides for the customer.

For instance, grouping a companys offering of air-conditioners into a few simple

ranges according to their main benefits to the customer could considerably simplify

the purchasing process. Currently, it is difficult for a customer to identify the most

suitable purchase according to their requirements because the range of products are

not clearly defined and communicated to customers. Simplifying the product offering

and aligning each product group with distinct customer segments according to the

products benefits would make the decision-making process significantly easier.

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4. Improve the selling approach

The selling approach adopted by a company is the cornerstone of its performance. In

the air-conditioning industry the technicality of the product emphasises the need for a

clear strategy in the selling approach. We have identified three points of improvement

which AC players could work on to unlock the markets potential. These are: customer

education, solution selling and cross-selling (Exhibit 10).

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Customer education

The technical nature of air-conditioners and their perception as high-cost are the two

greatest factors standing in the way of raising customer awareness about their

benefits. To deal with this situation customer education appears to be an effective

solution. By educating customers, the air-conditioning manufacturer helps them gain

insights about how theirproduct better meets customers needs and expectations over

a competitors product or a substitute. Companies can train their own sales staff and

those of their retail partners to educate potential customers about their products and

their uses. However, other employees who come into contact with the customer - such

as service staff - can also play an important role. Manufacturers should re-educate

and re-orientate all their customer facing staff to understand their role in marketing

the brand and its products.

In addition to staff training and orientation, providing employees with simple tools can

help them to diagnose a customers problem and provide the best solution. These

tools can also be targeted directly at the customer. For instance BEEhas introduced a

mobile phone based application called AC Power Saver that enables consumers to

calculate energy consumption and savings on their mobile devices. They have also

created a dedicated web site www.SaveEnergy.co.in with all the necessaryinformation including an energy calculator.

Focus on solutions not products

The days of simple selling are over, in the past decade the selling environment both

globally and in India has radically shifted. The focus is more on solutions rather than

products. In this shifting environment companies should adopt an innovative solution-

selling approach to first stimulate consumers desire for ACs and then convert it into afinal purchase.

For example, sales staff could conduct a home survey before suggesting a new

product to a customer. They could first visit a customers home and conduct an in-

depth analysis of the size of the space, the amount of sunlight and other relevant

factors before suggesting the right product. While carrying out this process the sales

person will have the opportunity to engage customers and build their trust in both the

product and the brand.

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http://www.saveenergy.co.in/http://www.saveenergy.co.in/http://www.saveenergy.co.in/


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Implement cross-selling

Cross-selling is a powerful and well-established selling approach. It is a proactive,

ongoing sales process which seeks to provide customers with a full range of products

and services. Most of the AC manufactures in India also produce other white goods or

electronic items and these products are sold through the same distribution network or

by dedicated sales and service teams. Companies can use their existing infrastructure

to cross-sell air-conditioners.

For instance, a service person for products with higher levels of ownership - like

washing machines or televisions - could identify the necessity for an AC while

servicing or installing these products in the customers home. Their knowledge aboutcustomers other purchases would also indicate customers ability to afford an AC.

Based on theses observations they can then suggest a suitable AC product and

financing option to the homeowner.

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5.Target new customer segments

There is often a mismatch between consumers needs and wants and the areas in

which companies focus their efforts in product development, distribution and

marketing. An organisation cannot create value for customers unless it identifies and

satisfies their needs. In a competitive market, customer segmentation has become a

cornerstone for successful companies. Those companies that fail to satisfy their

customers needs often do so because they dont have a clear picture of their target

customers. Understanding the customer is equally vital for AC players if they are to

increase the adoption of room air-conditioners.

Think beyond large cities

The presence of air-conditioning companies in India is concentrated in the countrys

metros and other large cities. Over the last decade the major players have built a

strong distribution network in these locations but have neglected smaller towns which

they deemed less profitable. With Indias extraordinary level of development the

situation is shifting and companies cannot overlook the tremendous opportunities in

these emerging segments.

Indeed, the percentage of households in peri-urban16 areas in each income category is

almost similar to that in urban areas. 57.6 million households in peri-urban India have

an income above 3 lakh rupees per annum, making it an attractive target for air

conditioner manufacturers. (Exhibit 11).

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16 Towns with a population less than 1,00,000


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Increasing incomes and changing mindsets outside urban India offer air-conditioning

players a huge opportunity to leverage their current turnover and achieve a

breakthrough level of adoption. By focusing on small cities and towns now, players are

likely to catch the next wave of growth and promote their brands in a new and

untapped market. Nonetheless, the specific characteristics of these consumers have to

be completely grasped and the universe of potential customers needs to be accurately

segmented.

The shift from a twofold to a fourfold customer segmentation

The Indian air-conditioning sector is undergoing a shift from a simple twofold

segmentation of its customers to a more complex fourfold segmentation. Earlier AC

manufacturers were presuming a more homogenous market landscape with only two

major customer segments - focused on price and running costs. But the air-

conditioning market - like many other markets - has become more heterogeneous

with the emergence of new customer profiles. To achieve the next level of industry

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growth companies will have to design their products and services around these new

customer segments by catering to their exact needs and expectations. This will

require not only the correct identification of their profile but a deep understanding oftheir behaviour. We have identified the four major customer segments that are

currently shaping the market (Exhibit 12). However, industry players should be alert

to the emergence of new segments as the Indian consumer evolves.

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1. Price conscious

Consumers in this segment are attracted by low prices. Innovation and technology

play a fundamental role in offering affordable air-conditioners by lowering the cost of

production which can then be passed on to the customer through a lower ticket price.

Currently, Haier and Onida are among the cheapest brands in the Indian market,

focusing their research on providing affordable air-conditioners. Tapping this segment

requires a strategy towards economies of scale with a focus on obtaining cheaper

components and materials. However, the competition for this segment has intensified

with the arrival of Korean and Chinese players with their global production chains and

portfolio of low-priced products.

2.Efficiency seeker

In recent years a focus on high energy costs and ecological issues has driven

consumers toward more energy efficient products. Many companies have introduced

air-conditioners endowed with inverter technology that has shorter motor run-time

and therefore consumes less electricity. Although energy efficient products are

relatively more expensive than standard variants, a large number of consumers are

choosing them to reduce long-term costs. The choice of these consumers will be

shaped by the published energy consumption of the product and its star-rating label

given by the BEE. Alongside clearly displaying the running costs, manufacturers

targeting this group could compare their products with those of less efficient older

models to demonstrate the falling running costs to wary consumers.

3. Aesthetic design

This segment of consumers is seeking aesthetic and customisable products. Aesthetics

play an increasingly important role in Indians choice of products as they becomeincreasingly conscious of interior design. The decorative paint segment for example

has recorded an 8% average growth rate over the last five years17. With this aesthetic

trend, consumers are increasingly choosing air conditioners which suit their home

interiors. In order to tap this growing segment, manufacturers should offer wider

ranges of colours and more discrete designs that help the product blend in with their

home decor. Whirlpool for example has developed an innovative digital tool that

enables the user to recreate their interior online in order to find the model of AC that

most suits their aesthetic preferences.

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17Snapshot of Indian coatings industry 2011, Indian mirror


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4.Health sensitive

Another trend that offers many opportunities for the AC industry is the increasing

focus on health and well-being. Indian consumers are becoming more and more

aware of safeguarding the health of their families and are seeking items which provide

concrete solutions. Hitachihas quickly recognised this trend by introducing the i-Clean

system. This technology automatically removes the dust accumulated on the AC filter

that would otherwise be disbursed into the room.

Along similar lines Samsung markets a range of air-conditioners with Virus Doctor

technology which eliminates air-floating particles such as bacteria and viruses. This is

increasingly relevant with the recent H1N1 epidemic and the increase in allergy cases

due to increased air pollution. To be credible however, this technology must have

certifications and labels. For example, Samsung is working with academic research

centres in order to prove the efficiency of its technology. Manufacturers could take this

approach further by seeking endorsements from panels of doctors and other experts

in respiratory diseases.

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Conclusion

Indias room air-conditioning market with its current low penetration rate offers huge

opportunities if the industry understand and cater to the shifting needs and wants of

Indian consumers. The penetration of other white goods at comparable prices is

substantially higher, pointing out several shortcomings in the current strategies of the

major AC players.

Through working along the five axes of improvement we have highlighted,

manufacturers have the opportunity to turn-up growth in the coming years. Better

financing options, well-directed innovation, new approaches to selling and more

effective communication can all be developed and effectively implemented through a

better understanding of established and emerging customer segments.

Manufacturers should not rely only on the strategies and customer segments that

were sufficient to drive growth in the past. As Indian customers become more

heterogeneous, persisting with the old approach runs the risk of neglecting the needs

of an ever larger number of consumers, and thus hindering overall industry growth.

TURNING UP THE COOL



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TURNING UP THE COOL


kanvic.com

Bangalore

Ravindra Beleyur

M: +91 94481 46963

E: [email protected]

Jaipur

Deepak Sharma

M: +91 99283 77800E: [email protected]

London

Bharat Vagadia

M: +44 7711 898089E: [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

TURNING UP THE COOL Realising untapped potential in India’s room air-conditioning market

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