Marketing Case Analysis - Tata Steelium

GROUP H:

ARVIND SHARMA

JATIN VIRDI

RAVI CHAND

SIDDHARTH SHAH

SHAILAV PRAKASH

ULLAS ANAND

Introduction:

Brand is a concept that exists in the mind of consumers [1]. Perhaps this could have been

the thoughts when Tata steel decided to launch world’s first cold rolled steel (CRS) by the

name ‘TATA Steelium’. Even before the launch of this brand, Tata group was the oldest,

largest and one of the most respected corporate house in India. With Tata steel being one of

the flagship companies of the group, already had a commercial presence in around 50

countries.

The basic idea was to create a brand out of a commodity. Branding inevitably leads to

commodity differentiation and hence creates customer preference. Tata already is

considered as one of the most trusted brands of India, therefore if it brands a commodity

such as Steel the customers will automatically prefer Tata Steel in situations where choice is

available between products which may provide almost equal benefits.

Technology Selection:

Before investing in the technology that can give it an edge over its competitors, Tata steel

took the first step in the right direction by accessing the demand in the marked and

identifying supply gaps. It is also important to analyze if the consumer is willing to pay for

the new technological solutions. This can be summed up by the statement “A demand

based perspective can offer new insight into core question such as competitive threats and

assessment of technological maturity” [2]. From the table 3, we can see that all the

innovations that Tata steel brought in the production of steelium gave the consumers an

option to for a superior quality product like better shape, less damage in storage etc. These

were the quality upgrades from the existing products in the market for which consumers

were willing to pay.

Importance for Retail market of CRS and Branding:

With the market divide equally among those buying in bulk and retail, it was important for

Tata steel to give both the sections equal importance to achieve its sales target. The

strategy of using its own sales force to cater the need of the large consumers can be

considered as a good one. However most the competitors were also doing the same.

However, while the competitor taking care of only their biggest buyers, Tata steel decided

to cater for the low volume buyer too. Tata steel mostly relied on the brand name along

with the help of some intermediaries to establish themselves as the leaders of this segment.

This can be considered as the example of company relying branding to establish itself.

However the challenge here was to supply product of superior quality to complement its

brand name. From the technological selection of Tata steel we know that they should not

have any problem achieving a brand name for the product.

Customer opinion:

With their Technological selection, Retail marketing strategy, branding of steelium Tata steel

managed to solved most of the problems consumers previous had with the other products.

With their superior technology they created an in-house product that not only solved the

problem of application, a common complaint with the other product, but also took care of

their pricing needs. Then, with only intermediaries in between them and the small

consumers, they managed to shortened this distance so that the consumers got the relief of

being listened. Now the customer need not have to roam from shop to shop or compromise

on the quality of the product. The branding strategy ensured that customers could now

identify the quality of the product easily and could rely on it as well.

- We can observe that the major reason for the launch for Tata Steelium was growing

customer dissatisfaction for the following reasons:

i) Superior quality CRS was beyond the reach of the small customers. Several processes like

heat treatment, cutting, welding was necessary before the use.

ii) Customers had little access to the manufacture of CRS. Adding on, the retailers did not

entertain quality complaints as they themselves did not get any support from

manufacturers.

iii) Identity and quality of CRS purchased from the retailers was doubtful. Small customers

had no option but to rely upon them.

To target dissatisfied customers the following initiatives were undertaken:

-Introduction of choice of grade and size thereby giving wide variety of applications

undertaken by small customers.

- Unique packaging which is considered as important criteria from the customer’s

viewpoint.

- Even though TATA Steel sales force may be limited however by branding their product they

are able to nullify this shortcoming and are able to reach to the small customers much more

effectively compared to the penetration achieved by their sales team.

-Targeting of B2C and B2B separately as the customer requirements vary drastically. One

can also say that branding was introduced by Tata Steel to tackle the issue of Seasonal

variations in demand of steel.

Thus we observe that, Branding Steel would help Tata Steel in two ways:

i) It would help to stabilize the flow of revenues even during business downturns.

ii) It would make premium pricing possible. TATA Steel was confident that by providing

quality , post sale service and service support from all channel member it would be able to

justify its premium charges.

TATA Steelium intelligently catered to these issues of the customers by:

-Ensuring product availability

-Continuous and high levels of service to customers

- Product and service-level customization

Developing Distributor/Dealer Network:

TATA Steel has been selective in choosing its dealers by having various screening tests.

Needless to say that TATA Steel has ensured that it will keep tight check on its distributive

channel and will ensure support and service culture.

Infact it is Win-Win situation for both of them. Distributors will also want to associate with

a TATA due to their brand image, thus increasing their chances of attaining higher margins

in turn. Further their monitoring system which included distributors and dealers ensured

that they are able to constantly get the market review and customer pulse.

We can see that there existed a long supply chain between consumer and manufacturer,

before the introduction of Steelium. This left the consumer frustrated due to various

reasons like the habit of wholesaler and retailers to buy cheap and then sell it for a

maximum profit, lack of retailers in the nearby locations because of the reluctance of

wholesalers to venture into the new markets, no value added service provided by the

retailers, hard bargaining, etc. Steelium decided to take advantage of this situation by

shorting this supply chain and attract the frustrated consumer who were looking for a

relief from all this. This was helped by the fact that steel prices had started to stabilize at

that time and retailers were looking for stable margins. With steelium Tata steel provided

exactly that. With the brand name driving the sales and the shorter supply chain and quality

product keeping the consumers happy, it was a win-win situation for all the involved

stakeholders.

Critical Action Areas:

As mentioned, maintenance of professionalism is one of the critical challenges for the

company. One of the possible solutions could be to introduce various training programs for

all the sales employees to be time to time so that they can remain focused and understand

the importance of the brand name. Workshops can be conducted for the dealers and

supplier at the regional and national level so that they can be taught the importance of the

value proposition of the business. This will also help in keeping a check on the retail prices

set by the dealers and suppliers and also help in understanding the consumer need so that

step can be taken to not only improve the quality of the product, but also give an idea as to

which technologies it is further required to invest.

Future Strategy :

1. A model for Co-ownership of a B2B brand to co-create Superior Value for B2B

customers.

The point here is to make everyone have the feel of the ownership of the steelium

brand by giving inputs and and asking for customized product. Customer has the say

about the size, shape and quality. Distributors can get the inventory plan and the

training help from the company owner.

2. Tata Steelium must ensure that they keep claiming on the premium added with the

brand. It is clearly mentioned in the case that the service component and the brand

is valued by the class of customers who have been rewarding the company with their

loyalty and premium.

3. Tata Steelium should have tailored strategy and communication for long-term

relationship. Tata Steelium should leverage its relationships to enter into long-term

contracts with the distributors and the small consumers. It should move forward

from the tonnage-driven culture to a value-driven culture.

4. The company should try and penetrate in the small and medium-sized towns which

are relatively untouched by the competitors so far. These places are the

consumption centres of future.

5. Limited capacity of the plant and a single location of manufacturing are constraints

to meet future demand and geographic reach. Manufacturing facilities at new

geographical locations in India can be explored to expand the production capacity in

order to meet the demand and leverage on the existing brand reputation of Tata

Steelium.

6. Steelium has to differentiate itself on service delivery which is a dealership activity. It

can leverage its head-start in the market and customer intimacy to develop and

deliver service differentiators. Targeting the specific end-user segments would be

critical.

SUMMARY:

Customer Segments

Market Opportunity/ Existing issues

Value Proposition

Distribution Branding Strategy / Product and pricing

Communication and promotion

Future Challenges

Large Customers (> 60-1500 tonnes). 0.4m tonnes per year

No powerful brand exists. At times customers buy in even larger quantities.

High-quality product Long-term strategic plans with Customers

Direct Distribution

Small Customers (< 60 tonnes) 0.4m tonnes per year

Consumers served by wholesalers and neglected

Existing CRS not suitable for deep drawing, bending, forming and artistic uses

Import beyond the reach of small

Providing complete peace of mind in purchase and consumption to the small customer by

Assured availability

Excellent quality and Customization of size reflected through slogan

Served through distributors -

Networks of Wholesalers and dealers.

Developed an organized distribution network for retail marketin

Choice of different grades and sizes

Ensured authenticity through embossed logo after every 1 m.

Impermeable and highly protective packaging.

Each packet carries

For B2B, promotion not through traditional advertising, but by direct mails, brochures and information through distributors

Emphasis on recruitment and development of

Increased competition from likely entry of Essar Steel, SAIL, Jindal and international players like POSCO, Mittal Steel.

Limited production capacity in wake of rapidly increasing demand.

May not be able to command a premium on the

consumers

No access to manufacturer of CRS, quality issues not entertained by retailers

No guard against selling of inferior CRS sold by dishonest retailers. Customers felt powerless against them.

‘Help Shape Your Dreams’

Dealing with a professional organization

Provided value added support services to the customers (by developing service centers at distributor’s premises)

g of CRS.

Tightly controlled distribution network by handling inventory for distributors, collecting sales data, introducing complaint-handling and order management processes.

important information like grade, size, weight etc.

Pricing done based on customers’ perceived value

Introduced floor price to ensure distributor’s margin

distributors’ salespeople.

Distributor’s capability enhancement by improvement of supply chain efficiency, TOC and HRD initiatives.

price in future.

References:

1. Why Brand Matters - Laura Pasternak, Principal and Chief Brand Strategist, MarketPoint, LLC

2. A demand based perspective on technological life cycle – Ron Adler