1.1 Problems The first problem Tanishq as a company is facing is the tension between their Tanishq and GoldPlus teams. This is an important problem because the Tanishq team believes the GoldPlus launch will act as competition as it prevents them from entering the plain gold jewellery market; and distract the organisation strategy. This is because on one hand they are trying to manifest themselves in the wedding market by designing traditional pieces in urban areas, while on the other, GoldPlus is offering plain gold wedding jewellery in small towns which is comparatively less unique. The latter however is convinced that their stores, designs and advertising strategy is more advanced when focusing on small towns, than if Tanishq were to enter the market. But the Tanishq believes they will be able to mark their presence in small towns while doing well in the upper market. They further think that “GoldPlus will canabalize Tanishq's sales” because customers will purchase from the cheaper option and GoldPlus allows negotiations so Tanishq customers would demand the same. Moreover, Tanishq would have to pay higher taxes if GoldPlus is established as a brand. This has brought the board to make a difficult decision as it would directly affect their image, sales and forecasted profits.
The second problem Tanishq as a brand is experiencing, is the “not for me” reaction and their elitist sensation. This is another important problem because since the brand has launched, consumers view the designs as Western and sophisticated and consequently extract a “not for me” reaction. The brand initially tried working around the issue by campaigning the jewellery as pieces of “adornment rather than investment” but in 2005 decided to enter the wedding market. Market research however shows that overtime the brand perception is moving towards rich, modern and sophisticated which ignites perceptions of the brand being “cold and snobbish”. These perceptions led to consumers believing that Tanishq pieces are too expensive and only an unwise spender will walk in.
The third problem Tanishq, the brand, is facing is its limited range of designs which appeal to a narrow range of consumers. The limited range prevents consumers from visiting Tanishq stores as they believe they would not get enough choice. Majority of their jewellery pieces are “adornment to the body” studded jewellery that draw a small market of consumers as Indians usually buy precious jewellery as an investment. Market research shows that over 3 years (2001-2004), the brand perception of Tanishq's range has only increased by -0.1. People still believe that Tanishq sells exclusive and latest jewellery but “in a limited range”.
Lastly, Tanishq is facing tough competition from local jewellers as Tanishq has a higher mark up of plain gold jewellery due to the competitor selling under-kartage jewellery. Further, the Indian consumers tend to be loyal to their jewellers and trust that they are offering the best prices. The brand's competition is growing with them, as Tanishq steps into the regional market so do their competitors.
1.2 Recommendation We recommend that Tanishq the company runs two parallel brands namely, Tanishq and GoldPlus. We suggest that Tanishq (brand) takes advantage of their elitist perception and focuses on upper market consumers in urban cities, while GoldPlus concentrates on serving the needs of rural customers. This allows for Tanishq to focus on jewellery for adornment and GoldPlus to serve smaller towns as jewellery for investment. We believe by operating as two separate entities, the company will be more profitable as Tanishq the company will be able to effectively cater to two different markets, the upper and lower.
This is the best strategy because both Tanishq and GoldPlus are serving well in their respective markets. Tanishq struggled to strive in the plain gold jewellery market as their gold mark-up was higher than local jeweller's due to the local jewellers providing under-karatage jewellery and over charging while Tanishq was selling authentic pieces and hence coming across as expensive. GoldPlus on the other hand has proven to be successful in the plain gold jewellery market with its Erode store breaking even in 6 months with profitable sales of Rs.10 crores.
Further, GoldPlus and Tanishq's target customers are significantly different. The average Tanishq customer is a woman in her mid-twenties with a college education, who spends smartly and can easily adopt both traditional and modern looks. Whereas, the ideal GoldPlus consumer is a “girl next door” who lives in a small town and only wears jewellery for festivals and weddings. Her purchase decisions are influenced by a man and her family. The differences in target consumers will make it difficult for Tanishq to strive in the wedding market in small towns. The brand will not attract the local people due to their designs being modern, “royal like” and expensive. GoldPlus is able to provide plain gold 22K jewellery for customers buying jewellery as an investment rather than adornment at flexible rates. By functioning as two separate entities, the company will successfully cater to both the markets as each appeal to a different group.
GoldPlus has adapted their stores to attract local eyes. They display all their pieces at the stores, and largely use the TATA name. The wide range and trusted name instantly plants a seed of confidence in their customers. Tanishq stores on the other hand resemble 5-star hotel receptions and have very few items on display. The grandeur of their stores resonates an expensive feel and hence deters a large number of customers. The fancy stores will not be effective in rural areas and would fail to attract local customers. Moreover, market research indicates that over the years Tanishq is moving away from a friendly, old and traditional perception to a rich, modern and sophisticated interpretation. This perception initiates a “not for me” reaction amongst several customers and hence walk ins and sales in small towns would be drastically less under the Tanishq name.
Further, Tanishq's brand promotions are affiliated with exclusive events such as beauty pageants, award shows and fashion weeks, all of which signify Tanishq as a sophisticated and upper-class brand, which attracts the modern and independent woman. GoldPlus on the other hand focus their campaigns directly to the customer such as engagement parties at the store and printing pictures of the couples on banners to hang at the store entrance. Families are excited to be linked to the Tata name and hence GoldPlus successfully appeals to the parents and families of the girl.
The staff is however worried that the continuation GoldPlus will result in a decrease in Tanishq sales as may purchase from GoldPlus as they allow negotiations. However, it is unlikely that the typical Tanishq customer will visit a GoldPlus store as they might view it as inferior and a GoldPlus consumer will not visit a Tanishq store either as they view it as expensive. Hence, it is improbable that Tanishq consumers would drive to a GoldPlus store for cheaper rates or demand negotiations at Tanishq stores. Further, the management is also worried about the 4% increase in excise duty tax which has to be paid by brands. If GoldPlus has more than 20 stores they will have to pay the tax as well. However, the benefits of higher profits at the company level, because they are able to cater to the lower and upper market, diminish the costs of paying more taxes.
1.3 Further Research We believe that further market research is needed and justified. Additional research can take the form of surveys and interviews. We advise Tanishq to send out surveys or conduct the interviews with a sample of consumers in all four target segments of Tanishq and GoldPlus. To ensure the effectiveness of these methods, Tanishq needs to be careful with the wording and objectives of their questions to prevent any unintended biased answers.
The market research will incur costs. It will take time and effort to construct the surveys and interviews, conduct them, analyse the data and interpret them. The company needs to use extra resources such as hiring interviewers. Moreover, common issues may arise including biased answers, inaccurate interpretation or failure to detect a general pattern the findings, meaning the additional research is of no use.
Nevertheless, additional market research also provides benefits for Tanishq. Previous research has shown that the Confident Matriarch and the Balancer should be suitable for Tanishq brand, and rural area and the Investment Driven for GoldPlus brand. Further research can provide more information about specific characteristics of each target segment, thus enabling the company to develop a more effective marketing plan to appeal the potential consumers. This also prevents the risks of inaccurately understanding of consumers' preferences and thus implementing an unsuitable marketing campaign.
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