Tanishq – The Turnaround Story
"When we started out we didn't think that we could achieve this, but now being jewellers to the nation doesn't seem so distant."
- Tanishq COO, Vasant Nangia, in March 2000.
The Unsuccessful Launch
In 1995, Titan Industries, India's leading manufacturer of watches, launched the Tanishq range of gold watches and jewellery. Till then, the Indian jewellery market was to a large extent unorganized, with a few recognized names such as Tribhovandas Bhimji Jhaveri and Mehrason's. Tanishq, an entirely new concept in the Indian market, thus had to struggle hard to be accepted by the customers. Industry watchers were extremely skeptical of Tanishq and doubts were being cast over its prospects. Tanishq began by offering jewellery in the 18-carat gold range, with designs borrowed heavily from contemporary European brands. The company justified its decision saying that it wanted to be 'different' from the traditional Indian offerings.
Tanishq performed very badly in the next three years, posting a huge loss in 1997-98, proving its detractors right. Jacob Kurian, Tanishq's chief operating officer admitted, "Tanishq, as a concept, was far too ahead of its times." Even if one agreed with Kurian, it could not be denied that Tanishq did commit mistakes.

Analysts decreed that the company's strategies were wary. At this point, Tanishq took various steps to correct the mistakes it had committed and very soon, posted its first ever operating profit in 1999. In 1999-00, sales doubled to Rs 1532 million against Rs 743.8 million recorded in 1998-99 and reached Rs 2000 million in 2000-01. Tanishq fared equally well on the export front also with heavy exports to UK, US, Australia and West Asia.

Tanishq was the largest overseas chain in US with 1,200 outlets. In the year 2000, exports contributed 10% to the company's turnover. The story of Tanishq, once written off as a losing proposition, making a remarkable turnaround was an example of a company single-mindedly working to make its own mark in the tradition bound Indian jewellery market. Behind this success was, of course, a well-planned and well-executed marketing plan.
Background Note
Titan Watches Limited was promoted jointly by Questar Investments Limited (a Tata group company) and Tamil Nadu Industrial Development Corporation Limited (TIDCO). The company, incorporated in July 1984 in Chennai, was started in technical collaboration with France Ebauches (a French company), one of the world's largest manufacturers of watch movements. Initially involved in the watches and clocks business, Titan later ventured into the jewellery businesses. The company was India's leading manufacturer of watches, marketed under the Titan and Sonata brand names with a 25% share of the total domestic market.
Titan established its first manufacturing facility in Hosur, Tamil Nadu and its first satellite watch assembly unit at Dehradun, Uttar Pradesh was started in 1990. In 1992, Titan set up a joint venture, Timex Watches Limited, with Timex Corporation of USA to market Timex watches in India [1]. And in 1995, Titan changed its name from ‘Titan Watches Ltd.'to ‘Titan Industries Ltd.'in order to change its image from that of a watch manufacturer to that of a fashion accessories manufacturer. In the same year, it also started its jewellery division under the Tanishq brand.

At this point of time, the jewellery business was highly localized and the concept of branded jewellery did not exist. In the late 1990s, India had around 0.2 million jewellers scattered across the country. Jewellery had predominantly been used as an investment rather than adornment. Hence, a change in the perception of jewellery from an asset to a fashion accessory was extremely difficult to bring about. People generally bought gold from the same family jeweller they had trusted implicitly for generations. Moreover, these jewellers made the jewellery to order and often bought back their products at the prevailing market rates.
Thus, from the very beginning, Tanishq found it hard to overcome the Indian consumer's preference for buying traditional jewellery only from family jewellers. The sleek and contemporary designs being offered did not go down well with the Indian customer who was used to heavy, traditional designs.

Vasant Nangia, erstwhile Chief Operating Officer, Tanishq said, “When we launched the Tanishq range, our designs were not appreciated initially as they were believed to be extremely Western. Also, we offered only 18 carat gold.” Over a period of time, Tanishq's research revealed many other loopholes in its strategies.

SETTING THINGS RIGHT

Tanishq found out that it had gone wrong mainly in two areas - the product proposition and retailing. Initially with a focus on the export market, its designs were predominantly Western, and the same line of jewellery was sold in India as well. However, when it shifted its focus to the domestic market, it was unable to sell these designs.

Therefore the first step was to change the brand positioning from that of an elitist and Westernized offering to a more mainstream, Indian one. The 18-carat jewellery range was expanded to include 22 and 24 carat ornaments as well. Tanishq also made attempts to redefine traditional styles in its designs. Tanishq realized that, given the diverse nature of Indian ethnicity, it would have to cater to tastes of all regions. Therefore, the emphasis shifted from the erstwhile modern designs to more ethnic ones and traditional ornaments (based on designs from various states) were launched. The company also began seasonal and localized promotions based on Indian festivals, such as during Durga Puja in West Bengal, Onam in Kerala, Diwali in north India, etc. Johnson Verghese, divisional head, sales and marketing, said, “We also decided to go in for transmigration of designs. So we not only got in more Indian motifs but also started stocking typical designs from Tamil Nadu in Mumbai and those from Bengal in Delhi. These designs, though Indian, provided variety to what the people in a particular area were used to seeing.”
Tanishq's team of in-house designers came out with about 3,500 designs based on current trends and the feedback from stores. At least 10% of these designs were changed every quarter and fresh ones were added to the stock. Tanishq gave complete freedom to the retail outlets to pick up designs, which they thought would sell in their stores. Almost all the outlets stocked the ‘best selling'range of designs, which did well across the country.
Tanishq was now pitted directly against the traditional jewellers who were offering similar ornaments. In order to add some value proposition to rise above the competition, Tanishq decided to address the issue of gold purity, which was most important to the customers. Traditionally, conventional jewellers used the touchstone[2] to test the purity of gold. Apart from the fact that the customers did not trust the method, it was also alleged that a slight amount of gold was always lost while testing. The customers had to accept this for want of an alternative. In 1999, Tanishq introduced the revolutionary concept of Karatmeters in its retail boutiques.
The Karatmeter used X-rays to give an accurate reading of the constitution of gold in the ornament within three minutes. Imported from Germany at a cost of Rs 1 million each, Karatmeters though expensive, proved to be the biggest USP for Tanishq in the coming years. In fact, its sales increased by 20-30%. The concept was later on heralded as a bold step towards professionalizing the Indian jewellery business.

In an attempt to elbow out competition, Tanishq conducted tests on 10,000 ornaments selected at random. In some cases the caratage was found to be as low as 10% and almost 65% of the gold tested was below 22 carats. As the caratage offered was on the lower side in traditional jewels, the jewellers kept the making charges very low to entice customers. This had become the norm all over the country. Tanishq had to struggle hard to break this convention. As the concept of Karatmeter became more widely known, customers began to realize that the rates they were paying for Tanishq jewellery were indeed justified. A Tanishq official commented, “They have begun to understand the total value proposition that Tanishq offers.” An all-India customer satisfaction survey conducted by Tanishq in 2001 revealed that over 50% of all Tanishq customers intended to make it their jeweller, replacing many long-standing relationships with the traditional jeweller.

When Tanishq was launched, it sold most of its products through multibrand stores. This did not help the Tanishq brand to make its mark. Having realized this, Tanishq decided to set up its own chain of retail showrooms in 1998. This proved to be a very wise move as sales picked up almost immediately. By July 2001, it had 47 ‘Tanishq boutiques'in 37 cities – 12 were in the metros - Delhi, Mumbai, Kolkata, Chennai and Bangalore, the rest in smaller cities with a population of at least 0.5 million such as Trichy, Nagpur, Amritsar and Patna. The focus on smaller cities paid off well with the annual growth being as high as 150% as compared to the 45% growth in metros. The number of boutiques was expected to reach 50 by the end of 2001 and to 70 by 2002.

Tanishq's efforts to standardize the price of its ornaments proved to be another milestone in its success. Gold prices differed across the country as they were based on different parameters concerning the local markets. In a bid to control gold price variations in different parts of the country, Tanishq decided to have a standard gold price across all its showrooms from March 2000. The standard price was made binding on all Tanishq showrooms. Tanishq based its gold prices on international exchange prices, resulting in prices often being lower than the local market prices. Nangia said, “We already have a kind of standard pricing in place, but this would represent a formalization of that system to the public.” Tanishq even had plans to link directly with the London Metal Exchange (LME) for daily quotes in the future.

Tanishq set up an ultra-modern and large-scale manufacturing unit in Hosur, Tamil Nadu at a cost of Rs 600 million. The unit had facilities like refining, alloying and stone casting and a dust-extraction system that kept gold losses down to 2% of the raw material while local jewellers typically lost 8-10%. This in-house manufacturing facility was the main reason, which enabled Tanishq to charge the same price across the country.

One of the company's most important initiatives was customer service enhancement. Tanishq launched a direct consumer contact programme and conducted surveys to monitor store walk-ins and footfalls and percentage of repeat customers. The company also kept the entry-level price as low as Rs 600 (for a pendant) and offered a range, which far exceeded that offered by any other jeweller. All Tanishq outlets gave a 100% return guarantee on its brand of jewellery and also exchanged other jewellery after deductions depending on purity. A customer satisfaction measurement program was started with the help of Customer Satisfaction Measurement Management (CSMM), an associate of IMRB. CSMM tracked customer satisfaction parameters for Tanishq on a quarterly basis.
This gave the company the benefit of benchmarking against local and international players and also aided in improving repeat purchases. As a result, Tanishq was able to directly link the remuneration of franchisees with customer satisfaction.

The company's corporate gold gift scheme (‘When you want to say thank you, say it in gold'), launched in December 1998 proved to be a major success. Tanishq delivered 50,000 customized gold coins to 0.25 million Maruti car owners nationwide as part of the 15th anniversary celebrations of Maruti Udyog. By 2001, the scheme accounted for almost 5% of the turnover and over 30 corporate clients like Coca-Cola, the UB Group, Whirlpool, the TVS Group, Ceat and Liberty Shoes.
The communication and promotion budget was increased from Rs. 65 million in 1999-2000 to Rs 100 million in 2000-01. A majority of this was spent towards advertising, while a portion was also earmarked for promotions tailored to match regional preferences. For instance, in New Delhi, which was Tanishq's single largest market, substantial promotions were carried out. The Rs 100 million was split into four parts, comprising national-level spends (both electronic and print media), regional budgets, direct mail and research. For the first time, Tanishq initiated a long-term media plan, aiming to give the brand a round-the-year presence and enhance awareness. The communication focused on design and quality instead of the price.
FUTURE PROSPECTS
The Indian branded jewellery market, though nascent, grew at the rate of 20-30% during 1998-2000. Besides Tanishq, other major players included Intergold, Gili and Carbon.

However, in the Rs 400 billion Indian jewellery market, Tanishq's share was not even 1%. Not willing to accept this as a ‘poor show,'Tanishq saw it as a vast opportunity instead. The company planned to attain a 2% market share in the next few years. Kurian said, “The jewellery market is one of the largest consumer segments in the country. It has an estimated 2,50,000 retailers with no national or international brand and no corporate player. Titan believes that this market is right for consolidation. A consumer-oriented, highly ethical corporate player will have great opportunity. Our growth rates in the past three years have fully substantiated this hypothesis.”
Tanishq had ambitious plans to invest in information technology and utilize Intranets and the Internet to link all of its showrooms to one another. There were also plans to do online monitoring of sales and design popularity as well as using the Internet to place orders. The Intranet was to contain a photo collection of all the designs in all the stores so that even those not in stocks in a particular store could be ordered by customers. In a highly innovative move, Tanishq tied up with Countrywide Finance for providing pre-approved credit line to the customers at selective outlets. This was expected to boost sales significantly in the future.

In May 2000, Tanishq unveiled plans to surpass its parent company's turnover by 2002. Jacob Kurian who had taken over as the CEO the same month, said, “We have finally figured out the jewellery business and should be solidly profitable, shorn of any caveat, this year.”
QUESTIONS FOR DISCUSSION:
1. Comment on the reasons behind the initial failure of Tanishq. Do you agree that the concept of branded jewellery was too futuristic even in 1995?
2. Briefly discuss the corrective measures taken by Tanishq to make a success of the branded jewellery business.
3. Explain how the usage of Karatmeters helped Tanishq combat competition from traditional jewellers.
ADDITIONAL READINGS & REFERENCES:
1. Tanishq's retail reach to double by 2000, Mukta Magazine, November 3, 1999.
2. Titan to have uniform gold price, Business Standard, February 19, 2000
3. Thakur Punam, Shining through, Business India, March 6, 2000.
4. Bhushan Ratna, Tanishq plans four-pronged marketing approach, Business Line, May 3, 2000.
5. Kapoor Neha, Branded jewellery market en route to gaining maturity, Business Line, May 5, 2000.
6. Natarajan Nikhila, Titan Industries unwraps jewellery thrust, Business Standard, May 23, 2000.
7. Joseph K. Mini, Former Titan ‘Tanishq'team floats Oyzterbay.com for branded jewellery, Financial Express, July 18, 2000.
8. Zachariah Reeba & Dutta Rumi, Titan shelves Tanishq demerger plan, Business Standard December 8, 2000.
9. Tanishq rolls out silver collection, Financial Express, February 15, 2001.
10. Titan Industries Jewellery foray pays off, Financial Express, July 05, 2001.
11. Bose Sushmita, The Midas touch, Business Standard, July 31, 2001.
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_____________(Source: www.icmrindia.org) Free case study for classroom use only.