What went wrong ? : Micromax
Riches to rags- the Micromax story.
The global mobile phone/smart phone industry has witnessed several rise and falls, the same is true for the industry in the India. Today, India is eyed by manufacturers as one of the biggest market for smartphones. One specific player who had to lose out on the game was Micromax. Micromax, started in 2000, they started out as a supplier of GSM enabled PCO landline phones for Nokia in India. PCOs were phones that were like landlines, but didn’t have wired connections, rather they were inserted with sim cards. They were profitable in the business. But they saw potential in the Indian market for mobile phones and entered the market in 2008 to compete with international players, the company launched phones that were cheaper and affordable for the masses and differentiated primarily on their price points. They launched the Micromax Xi1 phone in 2008 which was a huge success. Due to the lack of mobile phone manufacturers and research and development for the product in India, they moved to China in search of manufacturers, they branded Chinese phones as Micromax and sold them in the Indian market at competitive prices with Nokia and Samsung in the market during that time. By the end of 2014 the company was one of the largest feature phone seller in India and was globally at the 10th rank. Their list of brand ambassadors started from Hollywood- Hugh Jackman to Bollywood- Akshay Kumar and Twinkle Khanna. They sponsored events like the Asia cup, they sponsored concerts like Snoop dogg in India.
The year 2014 was also the beginning of the end for Micromax. Chinese manufacturers saw the potential and started swarming to the Indian markets with brands like Xiaomi and One plus. Chinese smart phone manufacturers were at an advantage that they had in house research and development, design and innovation teams and could create robust, cheaper smart phones at a netter quality and service whereas Micromax was dependent on Chinese manufacturers for the devices, and had spare parts problems which would lead to poor service quality for the Indian consumers. The entry of new Chinese brands to the Indian smartphone markets at affordable and cheap price points with better features meant that Micromax got kicked out of the race, their differentiating factor couldn’t compete the low price point and the better features of these Chinese competitor phones. As of 2018 Q2 Micromax market share was less than 1%, a steep fall from the 16.6% in 2014.
Where did Micromax falter ?
Micromax products were not manufactured in house by the company. They outsourced designing and manufacturing to Chinese companies and branded these phones as Micromax which they later sold. The lack of control over designing and production meant that they couldn’t control the product features and technology, they hence shifted their focus initially on branding and marketing. They initially did well in this by signing in celebrities like Akshay Kumar and using the humour appeal to do affective advertising. This was one of the factors that helped the company in its initial success. However the lack of service and product quality could not for long be compensated by the branding and marketing, hence finally they fell for the competition on lower price points to other Chinese brands that entered the market. Even after amassing sufficient funds to begin a standalone research and manufacturing facility for themselves in India, the company failed to do so and continued depending on Chinese manufacturers. The phones were imported from China and assembled in India. As the competition tightened on price points with Chinese phones competing with the likes of Samsung and Apple on even product features, the value conscious Indian consumer fell for the newer brands. They also took a slower path in moving towards 4G and continued to focus on 3G products as competitors flocked to the former. They were late to capture changing customer preferences and market dynamics.
Even before brands like one plus began selling phones exclusively online, Micromax was quick to enter the channel by selling its joint venture brand (with Cyanogen Inc) Yu phones exclusively online. But they were inconsistent in the efforts although the first two versions were sold online, the company quickly turned the third version to an offline sales.
Marketing myopia
The downfall of the brand and company can be associated to a classic case of marketing myopia. In the paper titled ‘ Marketing myopia’ by Theodore Levitt he says how lacking a long term vision and having short sightedness in terms of the product and the industry will negatively impact and eventually make the company and the brand obsolete. Here in case of Micromax, even with the advent and popularity of 4G in India facilitated by Reliance Jio, the company failed to realize the potential of innovating and keeping up with the technology. This lead to it losing on the race and being a late entrant to the 4G compatible phones. Which has been widely attributed as the main reason for the downfall of the company’s market share other than the product quality issues.
Diversification
With dwindling sales in the smartphone segment, Micromax entered into the television market in 2016 with an initial intent to capture around 5% of the market share. Like the smart phone Yu, the Canvas Smart android based LED model was launched in 2018 exclusively on the online platform targeting the urban population. However they lost on competition to players like Sony and One plus. They also launched a fully automatic top loading washing machine.
Although diversification was a viable option for the company to stay afloat in the market after losing the bulk of smart phone sales to competitors cutting profits down by 76% , they could have launched the products after completely recalling the products in the smartphone category, whereas Micromax launched the products in other categories continuously as it planned to roll out new models of smartphones to recapture the market. To the customer, this would be seen as a futile effort by the company to stay in the market. It simultaneously affected the image of the new product, which got associated with the low quality and service of Micromax smartphones unintentionally. They should have disentangled and differentiated the new product categories completely from any references to the smart phone brand and launched the television and washing machine under a different brand name which would help them to remove associations like ‘being cheap’ and ‘made in china’.
Also the entry into television and washing machines seem to be too farfetched. Instead of foraying into consumer electronic durables like washing machines, they could have focused on products associated to smartphones like power banks or earphones as was done by competitors like Redmi. They could have also made efforts to enter the gadget segment of touchscreen tablets. They could have leveraged the Micromax brand in a better way had it been a product like a power bank which is useful and handy for the cost conscious Indian consumers.
Disentangling the frame of reference
For the majority of the time, Micromax was known for its affordability rather than features. Their focus was on the phones affordability and fun aspects with ads often focusing on aspects like gaming and entertainment. The frame of reference which remained the competitive smart phone category became an anchor for the sales and success to the Micromax brand as customers saw better features and quality at similar price points. As competition increased on smartphone features, they failed to disentangle this reference and also failed to bring in innovation to the product and provide quality product and service. For the newer product ranges that were launched which include the android LED television and the washing machine categories, Micromax could have done better to have kept the brand name out of the way and launched the product under a different name as they did for their JV smart phone model- “Yu”. Yu was one of the first phones in the Indian market to be sold exclusively online even before the one plus range. Android LED TV’s and smart TV’s with google assistant would have run better in the market. But customer perception about the poor quality of Micromax phone brands affected the sales of the products which could have been avoided with the launch of a new sub-brand or under a new name. They could have created a new frame of reference for the newer products which was also not cared for and hence the product faced the full effect of competition from players like Sony.
ELM model -Change from peripheral to central route
Micromax mostly focused on hedonic attributes of the product and focused on the peripheral route to persuasion with a low need for cognition and low involvement and motivation. This was done to create a hollow hype as the phone was lacking on competitive features. To raise involvement they did focus on celebrity and humor appeal with the initial successful product range however as competition tightened, they lacked to do this for the latter newer models. As the customers became more knowledgeable in terms of product features and technology, there was a need for creating quality communication with message arguments focusing on the product features and hedonic aspects in the right mix. With the newer product variants in the 4G category like the canvas they could have focused on creating a need for cognition in their customer base. This would have helped to change the customer attitude and mind-set towards the brans and created a positive affective appeal.
Affective advertising
Micromax had been quite successful when it came to using celebrity and affective advertising with humour appeal. They had brand ambassadors starting with Akshay Kumar in Bollywood to the Hollywood star Hugh Jackman who was the brand ambassador for their latest canvas model. The ads often took worked on humour and action and focused primarily on the hedonic attributes of the product. However marketing for the diversified product range weren’t quite as successful as was the same for later smart phone versions which were introduced since 2016. It would have done them well to stop competing in the smartphone segment and to completely shift attention to other category smart TV or to try to make an effort to the lower segment of customers with the least price points.
Compatibility & observability
As for factors affecting diffusion in case of a new variant launched in the smartphone segment by Micromax in a suitable price category preferably targeting the lower end of the customer segments with low budget phones; they could focus on compatibility, complexity and observability. To capture customer’s interest, they must focus on features which would improve compatibility for customers in these segments, as they did earlier with high batter life and other similar features like regional language options and basic data and calling features incorporating 4G or 5G technologies with low complexity. They also should increase the observability as they did by securing government contract as achieved in Chandigarh where they secured the deal to deliver mobile phones to the rural populations. Increasing the observability of the product in these regions by means of usage by local government bodies and authorities. However this is a weak bet with the increasing penetration of smartphones in India.
The Future
The future is very bleak for Micromax. The company has not officially wound up and has been extremely low key without any new launches recently. There was a recent news in July 2020 about the company teasing about the launch of three new phones in the budget segment, with ‘premium’ features. The increasing anti-china sentiment has presented an opportunity for the company to relaunch, but it all depends on the product and the marketing and positioning decisions that the company takes. The company could try to leverage the present condition favourably but if the product doesn’t live up to expectations, it would kill the brand completely. As mentioned earlier taking a strategic route to diversification could also help save the company and generate enough revenues and brand equity which could be utilised in improving the mobile phone category.
References:
4. https://en.wikipedia.org/wiki/Micromax_Informatics
6. https://www.themobileindian.com/news/micromax-can-it-regain-the-attention-of-consumers-26547
7. Marketing Myopia- 1960- Theodore Levitt.
