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The story of VOLTAS air conditioners: Monopoly, failure and resurrection

Abhishek Kumar Singh by Abhishek Kumar Singh
18 June 2022
in Premium
VOLTAS company
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If there is an entity which has survived a market onslaught for nearly 7 decades, then the conventional wisdom suggests that it must be doing something extraordinary. But, VOLTAS is different. As expected, the company co-owned by TATA focuses on correcting minor stuff. It is exactly what helped them establish a monopoly and it is exactly what brought them back from the brink of extinction.

Early years of VOLTAS company

The story of resurrection of VOLTAS is nothing sort of miracle born out of behavioural changes. The Mumbai-headquartered company was once a darling of the masses for nearly 4 decades. Then it took a brief but endangering hiatus by the end of the millennium and came back with a bang in the 21st century.

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VOLTAS company was established in 1954 as a collaboration between Tata Sons and Volkart Brothers. UP until India liberalised its domestic economy in 1991, the company remained a dominant name in India’s AC market. The lack of competition due to ultra-socialist policies meant that company did not need to innovate much in order to stay relevant in the market. It made more than 40 per cent of ACs sold in India. However, liberalisation opened the floodgates as brands like LG, Samsung, Electrolux, and Whirlpool among others started to replace VOLTAS. Soon, the market share of VOLTAS company fell to a single digit. A course-correcting mechanism was the need of the hour.

VOLTAS started late but remained steady

Better late than never, VOLTAS company started to adapt to changes during the late 1990s. Soon, it did market research. The research focussed on finding the changed needs of the consumers. Additionally, they also introspected on their product quality by comparing it with those under other big names available in the market. Traditionally conservative TATA group opened the gates for engaging other companies for the resurrection project as well. The company found that its design is no longer appealing and its products are no longer in line with people’s expectations. Additionally, the manufacturing cost and lack of marketing also put a dent in Company’s reputation.

Road ahead was difficult, but with TATA group, anything is humanly possible. VOLTAS company decided to take its competitors head-on. The first issue it tried to solve was producing technologically advanced ACs while simultaneously lowering the cost. But the input cost was high and components like compressors and Copper tubes put a huge dent in VOLTAS’ pockets. Additionally, fitting the components in such a way that the product would look better was another challenge. All this combined with the cost of throwing the final product into the supply chain used to exacerbate the final cost. Adding insult to injury, the ACs that VOLTAS made got a bad rep by the name of ‘dabba (box).’

Read more: How former Mahindra MD, Pawan Goenka is helping achieve the Make In India dream

VOLTAS brought in sweeping changes

To eliminate the aforementioned bottlenecks, VOLTAS roped in USA’s Fedders International. With a fraction of money required to put into research and development, VOLTAS gained access to Fedders’ R&D centres in Florida and Singapore. It could learn about the new product variants, product promotion and launching strategies among others. From Fedders, VOLTAS brought in purification filters, ionisers, and electricity-saving modes in their ACs. The company also changed its manufacturing facilities from Thane to sales tax-exempt Dadra.

All of the aforementioned efforts not only helped VOLTAS company to produce better products but also at a cheaper rate. Within 3 years of entering into a pact with Fedders, VOLTAS launched 70 ranges of products including 1.5 tonnes AC. The price of VOLTAS ACs dropped by 20 per cent and ACs became accessible to common people. But this time VOLTAS did not get complacent. It started to spend 1 per cent of its turnovers in improving customer satisfaction and increasing its fold.

Company expanded its retail outreach

VOLTAS company had established itself in industrial segments (steel, power and automobile companies), commercial establishments (office buildings and complexes) and transportation networks (airport, railway stations among others). However, the vast section of retail business still remained an unchartered territory. Most people in India still preferred coolers above ACs, apparently due to their low cost.

VOLTAS decided to conquer this segment with attractive-looking ACs at an eye-catchy price of Rs 9,990. Now, VOLTAS image was changing from ‘Dabba’ to ‘India ka AC’. Soon, they did another market research to find how much they can penetrate into Indian markets. VOLTAS employees jumped on the ground and found that if somehow their ACs could bring down the cost of electricity bill to Rs 1,000, their company would register an incredible boom. The company followed up on the feedback and brought more efficiency, bringing down the cost of electricity consumed by the appliance.

Marketing campaigns helped VOLTAS company to expand its market share

Meanwhile, the company also launched massive marketing campaigns to apprise the audience about the benefits they could accrue from internal changes. It invested around 50 crores for brand building and 17 crores for marketing. The company even hired Sharukh Khan, the rockstar of his time to advertise for it. On the technical side, Company launched a tagline called ‘intelligent cooling’. You see, it’s tough to explain minute technical changes to an average audience. So, VOLTAS decided to put in a quick fix solution and subsumed every change it brought under one tag line. The marketing did wonders and soon VOLTAS was involved in a neck-and-neck fight with its foreign competitors.

But, as the saying goes, ‘miles to go before I sleep,’ VOLTAS decided to never sleep. It then saw the whole of India as a big consumer market. The company told the audience that its ACs can be used in each part of India and the diversity in climatic conditions made no difference to its usability. VOLTAS ACs could be used in dusty climates to keep the house clean, in winter and rainy seasons to stay dry and so on.

They in fact designed a special product to fulfil all these demands. It was called Voltage All Weather AC. The product was so efficient that the company did not need to spend much on its advertising. Its ads were simple but effective, depicting a common Indian struggling with changing climate. VOLTAS showed that its ACs brought in solutions. The change was revolutionary, to say the least, and in 2017, LG vacated its space for VOLTAS to capture.

Company driving on customer satisfaction will always sustain

All these efforts could not have brought in substantive changes if the customer satisfaction value of the TATA group wasn’t accepted by VOLTAS company. The company firstly roped in efficient and result-oriented dealers and rewarded the performers with credit extensions and incentives, boosting their morale. VOLTAS also invested heavily in customer services and its after-sales customer satisfaction is one of the best in any industry.

Riding on the wave of the aforementioned reforms, VOLTAS currently manufactures nearly 26 per cent of ACs sold in India. But it is still far away from its own record of 40 per cent market share. The way VOLTAS has rejigged itself, even 50 per cent is a small target for the company.

 

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