CROSS-BADGING CROSS-BADGING IN INDIAN MARKET: AN ANALYSIS
R.M.MONISH 09MBI105 VIT-BS VIT University
Abstract
This paper explains about the Cross badging and how is its role played in Indian market, where an analysis is made. Companies go for cross badging in order to ensure cost savings and thereby achieving the economies of scale. Cross badging can take place in any type of industries. But in this paper the focus is limited to the automobile industry, since this is the only platform where the concept of cross badging is popular. This paper also exhibits the objective behind why the companies go for cross badging and what is the perception of the manufacturer or the companies behind this concept and as well as how the customers view or perceive cross badging. It also discusses on the types on how companies go for cross badging. Some of the examples are cited in this paper to give a clear idea on how companies went on to cross badging and their effect in the Indian market. And it also showcases the risks or the issues associated with cross badging. Key words
Automobile, Automobile, Companies, Companies, Cost savings, Cross badging, Customers, Customers, Economies Economies of scale, Indian market.
Introduction
Cross badging is the concept where one company manufactures the product which is similar to other company by making minimal or cosmetic changes in the product. This concept is mainly popular in automobile sector. Wherein a car manufactured by company X will also be manufactured and marketed by company Y by making some cosmetic changes to the car which involves the change in logo, spoilers, headlights, signal lights, etc. Here the partner companies tend to share the same platform by making some minimal cosmetic changes in engineering process as mentioned previously. This is being followed globally by the automakers and this resulted in a great success, but whereas in case of Indian market this concept did not achieve its objective. There are various reasons behind this which will be discussed further in this paper.
Types of cross badging Same car with different brand:
In this type of badging the individual manufacturer usually sells the same manufactured car using different brand names catering to different regions and markets. This is done mainly to increase or expand the overall rang of the brands rather than going for the entirely new model of the product.
Companies trade off the products that each brand lacks in its line up:
This is the other way of cross badging, where if any two companies lacks in its line up then these two separate companies enters into trade off of products in order to fill the gap. For example if company X is having SUV’s and company Y is having sedans then company X will trade off the SUV with Sedan from Y therefore finally these two companies X and Y will fill their lines where they are lacking. An example of this would be the first-generation Honda Odyssey being rebadged as an Isuzu Oasis because Isuzu needed a minivan, while the Isuzu Rodeo was rebadged as the Honda Passport because Honda had the need for an SUV.
Through joint ventures:
The cross badging can also be performed by the companies by entering into the joint ventures. These companies pool their resources and use the same platform to manufacture the car and then they market these products under their own brand names.
Issues involved in cross badging
Implementing the cross badging plays a very crucial role. If the implementation fails then it incurs huge cost for the companies. So this aspect must be addressed carefully by the companies while taking decisions on cross badging. Apart from this, there might be a chance of incurring high selling costs by the companies since they have multiple car brands and each of these must be marketed separately and thereby establishing the distribution networks as well for each of these cars. If the same company owns two or more brand under it, there are chances of cannibalisation to take place, where the company’s own product might affect the sale of the other product of the same company if it does not provide a unique and distinct identity or the image for each of these brands. In short run this cross badging might be beneficial, but whereas in the long run it might harm the companies due to the dilution in differentiation of the product in the market.
Why do companies go for cross badging?
The core reason why companies go for cross badging is to reduce the overall costs involved in new design/model making process, engineering process and therefore increasing the volume of sales by negligible incremental investments over a period of time. It also helps the companies to reduce its activities in sourcing, since it uses the platform of other company. The role of supply chain can be minimised to a greater extent and also the cost related in each stage of SCM activity can be brought down. The companies also enter inorder to fill up their lines in which they are lacking in their portfolio. This gap can be bridged through cross badging by entering into strategic alliances.
When companies align, they can save resources by sharing components and platforms. To use another partner’s car under a different brand name, the companies pay a royalty or a model fee according to the decided agreement.
Customers’ perception or views on cross badging
Taking into account Indian customers the following are their perception on cross badging: •
The customers are very price sensitive in nature. So, if they can get the same type of car with minimal changes in its design then they tend to prefer the one which is having a lower price tag.
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As brand loyalty in this segment is very low, there is a tendency among the customers to switch from one brand to another.
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Another important point is that the customers are confused in deciding which brand and car to select since their offering are similar in nature.
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Consumers are smarter these days; they do a lot of research online before buying a product. Dealers of competitors too are very enthusiastic on quickly informing the customers about the sameness of the cross-badged cars in the market.
Examples of cross badging in India
VW-Vento Nissan-Micra Nissan-Sunny
Cross badged companies with their product Skoda-Rapid Renault-Pulse Renault-Scala
VOLKSWAGEN VENTO & SKODA RAPID:
In this cross badging cannibalisation took place. VW sold 3,474 units of Vento in October 2011. In December 2012, it sold 1,975 units where there is a drop of almost 43 percent. In the same period, Skoda Rapid’s sale went from zero in October 2011 to 1,890 units in December 2012.
NISSAN MICRA & RENAULT PULSE:
Before the launch of Renault pulse, the Nissan Micra was averaging the sales of 1,300 units a month. After the launch, both combined have not averaged more than 1,500 units a month. On its own, this number looks just about okay. But compared with the sale of the Ford Figo (it has more than double the sales) and it becomes clear that cross badging has not really helped Micra or Pulse gain the market share. NISSAN SUNNY AND RENAULT SCALA:
During the year January-august 2012, Sunny has sold an average of 2,500 units a month. After the launch of Scala in August, while Sunny’s sales have suffered, the combined sales (Sunny and Scala) are still averaging around 2,400 units a month.
Cross badging scenario in Indian Market
The concept of Cross badging is being used by various automobile manufacturing companies over the years and they also have a proof that this particular concept called cross badging workout for these companies. And so with the growing demand and market toward automobile sector in India many players found this country as an opportunity for them to enter this market and capture the market as much as possible along with the inclusion of cross badging concept into the Indian automobile market. However the Indian Market has not responded well to this cross badging. In India the cars which are being sold or marketed as the cross badged ones have the similarity both in their looks as well as the features. And more over the cross badging tend to work more beneficially in the markets where there is high levels of brand loyalty. Where as in a country like India the customers searches for the value and therefore there are chances that he might switch over to another brand very easily. The players like Volkswagen and Renault & Nissan are being new to the market they have to face heavy competition in the Indian market. Nissan Motor India's spokesperson asserts the company is using common platforms and components to develop two different cars, each with unique design and styling cues that appeal to different demographics."We only move forward with platform and component-sharing
projects when it promotes brand integrity and customer satisfaction," said the Nissan India spokesperson. To develop a new car in India, it would cost around Rs. 300 Crores, but whereas if it goes for cross badging it would cost only around Rs. 20 Crores since it requires only tooling changes in the development process. In order to increase the value proposition and market expansion the manufacturers go for cross badging. But in India this concept did not work out well. Cross badging for the manufacturers in India did not expand the market but it got contracted.
Conclusion
Finally I would like to conclude that Cross badging should not just be internal rather the cross badging decisions should consider and keep in center the differences in the market and the consumers. We can say that cross badging is successful only when it meets its objective of having a win-win proposition of both instead of resulting in cannibalisation. This is what happened in India where cannibalisation has resulted in many of the cases. And in countries where brand loyalty is high this concept might perform better. In case of Indian consumers, the brand loyalty in the automotive sector is comparatively low. Therefore this concept of cross badging works well only when the brands of the manufacturers are well established and that gains the strong loyalty from the consumers. The other reasons for the failure may also include the lack of differentiation in the products, which will end up in confusion in the minds of the customers. And this concept is new to India; it requires some time for this to go on in a positive slope.
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