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Miele India's head on the art of selling high-end goods

Aug 03 2012, 18:06   |   By Forbes India

Dhananjay Chaturvedi/Forbes India

They need to be more restrained and create a sense of timelessness, says Miele India's Dhananjay Chaturvedi

Name: Dhananjay Chaturvedi
Age:
48
Designation: Managing Director, Miele India
The Challenge: To define and create a market that didn't exist, and to convince customers who had the money to buy a luxury product but questioned spending it on something that would be hidden inside the kitchen

How He Did It: Chaturvedi unlearned practices that he had mastered selling mass products for almost two decades, but brought in all his knowledge of the local market, innovating Miele's global practices to suit local consumer tastes and market conditions in India

I was being interviewed by Miele's head for human resources when I first realised that this job was going to be completely different from my earlier ones. We were talking about automobiles and he asked for my opinion on brands like Toyota and General Motors. I answered that these brands represent value for money and dependability. Then the HR head asked me what I thought about brands like Maserati, Bugatti and Rolls Royce. After I added my bit, he said, "These brands may not sell as many as a Toyota. But very few people get to work for them. Here, a higher level of marketing and sales effort is required. One needs to unlearn and acquire new skills." This excited me and played a big factor when I joined Miele in 2008 after spending over two decades in the mass consumer goods and home appliances sector, including stints in LG, Philips and Onida.

Miele is a Germany-based luxury home appliances maker, set up in 1899 by Carl Miele and Reinhard Zinkann in G├╝tersloh. The company initially made butter churners, then cars and motorbikes before specialising in luxury domestic appliances like dish washers, vacuum cleaners, washing machines and refrigerators. The prices vary from Rs 23,000 for a vacuum cleaner and Rs 1.6 lakh for a rotary ironer to almost Rs 9 lakh for the Mastercool range of refrigerators. That was quite different from products that I was selling in other companies, which cost at least five times less and lasted an average of 5 years, compared with 20 years for a Miele appliance.

But it was not just the price tags or the shelf life of a product that differed. To sell a mass consumer product, one needs to penetrate the market by creating an extensive sales network. We place the products in retail outlets, displaying them prominently. We come out with various "schemes," including discounts, freebies, exchange offers and financing options. Products have to be full of features and need to sell on the "value for money" proposition.

Luxury brands, on the other hand, need to be more restrained and create a sense of timelessness around their products. A Miele refrigerator will not have a fancy colour like wine red that will go out of fashion within a couple of years. Miele products are either in white or natural steel. For us, distribution and marketing is selective. We do not bombard television, newspapers or billboards with advertisements. If mass consumer goods are chapters 1 to 21 in the book of marketing, then at Miele life begins at chapter 101.

The domestic market didn't have a distribution channel to sell such a premium home appliance. In fact, the only Miele products present in India came through customers who had bought them overseas and brought them home. Also, Miele usually partnered with fellow premium brands that make kitchens, including the modular ones. But in 2008, there were few premium kitchen brands in India. For us, the presence of premium kitchen brands in a market is a sign that we should enter it, because only in a kitchen that cost upwards of Rs 20 lakh do we have any chance to sell a Miele product. When I learned about these challenges in my first year at Miele, I wondered if I had made the right call!

But we had experience working in the Indian consumer durables market, and backed by a few research studies, we decided to enter. And our choice of the first few markets in India reflected that experience. We set up service centres and warehouses in three cities - Delhi in the north, Mumbai in the west and Bangalore in the south.

These three serviced other markets in which we were present in their respective regions-Ludhiana in the north; Pune, Ahemdabad and Surat in the west; and Hyderabad and Kochi in the south. Many people have asked why we chose Kochi and not Chennai. Thanks to its NRI population, a few luxury modular kitchen brands were present in Kochi and not in Chennai.

Moreover, Delhi might be known for its ostentatious lifestyle, top cars and mega weddings. But in Kochi, the value of an average kitchen sold is three times the average sum in Delhi! Later this year, we are going to enter Chennai too.

Among other cities where we are present, Surat and Ludhiana didn't have any premium kitchen brands, but our research showed that they have an appetite for Miele products. So in Surat, we tied up with a leading sanitary and hardware dealer. This guy has a four-storied shop with all leading brands of fittings that come in a house, including furniture and bathroom.

He had thus built a network of leading architects and interior designers, and many of his customers were wealthy diamond merchants. We have now tapped into that network to sell Miele products in the port city. In Ludhiana, we tied up with the leading dealer of premium sanitary ware. I told him if you can sell a small piece of pipe priced at Rs 2 lakh, you can surely sell our machines!

It also helps that German luxury car markers - Mercedes, Audi and BMW - have done well in India. Any market in India that buys these cars is also a market for us. We have also tied up with a few of these carmakers for joint marketing initiatives. Recently we did one event with BMW where the cars were displayed in the Miele Experience Centre at Jasola in New Delhi.

We used their customer data-bank, and more than 100 people attended the event, which had food and wine. We do similar events with single malt brands like Balvenie, premium cutlery maker Villeroy and Boch, and Riedel, the Austrian maker of ultra-premium wine glasses.

I picked up the idea to do these events during my "initiation" visit to the England unit of Miele, one of 12 of the company's units across the globe I visited in 2008. In Singapore I got the idea to form links with the culinary community, including chefs. In India, we were earlier associated with Karen Anand and now with Sabyasachi Gorai of Olive Bar and Kitchen, who was deemed India's best chef by the President of India. He is our consultant, trains our in-house chefs and also helps us organize theme-based events.

But none of those visits prepared me on how the Indian consumer buys luxury. I know of a person who is one of the highest income tax payers in India. He has a garage full of luxury cars, owns jets and helicopters and wears the most expensive suits and watches. But when it comes to buying premium home appliances, he wouldn't budge. He says, "Why should I spend Rs 3 lakh on a washing machine?"

In another instance, one day at our Centre in Jasola a family of four got out of a battered small car. The man was wearing slippers and the rest of the family was also looking a little shabby, surely not like one of our typical customers. They came into the Centre and started looking at our products. I left, thinking they will be out soon after quenching their curiosity. But when I came back an hour later, they were still there and had already ordered appliances worth Rs 40 lakh! He was a businessman from Old Delhi and was building a new house in a posh colony in south Delhi.

Outside these extremes, we Indians like to flaunt what we wear or own; from branded clothes and accessories to what we drive. Thus many of the prospective rich clients don't understand the need to buy a product that will be hidden inside their kitchens. Right now, most of our customers are those who are well-travelled or have lived overseas for a while and are now coming back. They are aware of the Miele brand and understand the subtlety of owning a premium home appliance.

While we have done well (we added more than 400 customers in 2011, compared to about 300 in 2010), I believe that the inflection point will come by the end of 2013. That is when the first residential projects, whom we have partnered with, will be completed.

Each of the flats in this premium project will be fitted with Miele products. Every year after that, similar projects are slated to be handed over to customers. Other than increasing our top line in India, this will also expand Miele's visibility. Real estate is one of the three main channels to sell our products. Retail and institutional sales, especially in hospitals, are the other two.  

(As told to Prince Mathews Thomas)

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