turning up the cool realising untapped potential in india’s ac market

TURNING UP THE COOL Realising untapped potential in India’s room air-conditioning market

TURNING UP THE COOLRealising untapped potential in India’s room air-conditioning market

A C


Kanvic is a management consulting firm helping businesses develop winning strategies, drive profitable growth and achieve operational excellence to reap long lasting rewards in the fast growing Indian economy.

We work with C-level executives to develop innovative solutions for the business challenges of 21st century India by bringing in leading edge management thinking informed by in-depth research and sound analysis.


TURNING UP THE COOLRealising untapped potential in India’s room air-conditioning market

Deepak Sharma

Shiv Kumar Sharma

David Daniel-Sainteff

July 2012

kanvic.com

About the Authors Deepak Sharma is a partner and co-founder at Kanvic where he leads the strategy practice. Shiv Kumar Sharma is an associate consultant and David Daniel-Sainteff is a junior consultant in the strategy practice.

Acknowledgements Kanvic would like to acknowledge the contribution of the team behind the report, especially to Gehan Wanduragala and Vlad Flamind who provided editorial guidance.

Further information We welcome your questions and comments on this report. For further information, please contact us at:

Email: [email protected]

Phone: +91 99283 77800


mailto:[email protected]


Contents

Foreword 7

Executive Summary 8

The low penetration of AC in India 12

The paradigm shift in the room air-conditioning market

The huge market that remains largely untapped

Strategies for accelerating growth 19

Develop and communicate easy financing options Innovate to reduce costs and satisfy customer needs Develop customer-friendly communication Improve the selling approach

Target new customer segments

Conclusion 38


Foreword

India’s consumer durable industry has witnessed fast growth in recent years and it is expected to grow at a similarly rapid rate for some time to come. However, India’s air-conditioning industry has been something of a laggard compared to its peers. Despite seemingly impressive headline growth rates, the penetration of room air-conditioners remains strikingly low compared to other white goods, with a mere 3.8% of households having adopted this product category.

In ‘Turning Up The Cool’ Kanvic sheds light on the cause of this low penetration rate and shows the shift in demand that occurred from the commercial to the residential segment. In so doing we can see how the industry has struggled to adapt to serve this larger but more complex consumer market.

Whilst the long-term growth outlook for the air-conditioning sector remains positive, the late onset of summer in 2012 has combined with an uncertain economic climate to expose weaknesses in the industry’s current approach. In a growing market sub-optimal strategies can survive for a time, but when they are buffeted by the chill wind of an economic downturn, the entrance of new competitors or even the vagaries of the weather, they are quickly blown away as a lot of hot air.

In this report we hope to provide the industry with practical strategy options that will enable it to more quickly realise the untapped potential of India’s room air-conditioning market.

Deepak SharmaDirector and co-founder


Executive Summary

The air-conditioning market in India has witnessed rapid growth in recent times thanks to the country’s strong economic performance, rising household incomes and a favourable shift in consumer perceptions towards air-conditioners (AC). The market’s compounded annual growth rate (CAGR) has run at 17% over the last three years. In 2011-12 air-conditioning sales reached around Rs. 17,600 crore1. However despite this rapid growth air-conditioners have still only reached a mere 3.8%2 of Indian households according to the most recent data. This low penetration rate illustrates the huge opportunity the AC industry in India is yet to seize.

In recent years the Indian AC industry has been marked by a fundamental shift in the source of demand for room air-conditioners. This shift has seen the bulk of sales move away from the traditionally dominant commercial sector and toward the residential sector, which now comprises 60% of the market. The AC industry in India has so far failed to fully grasp the more complex needs and expectations of this newer, larger and more diverse customer segment. This lack of understanding means that the AC industry is behind the curve in areas from customer communication to easy financing. As a result, AC penetration in India lags behind other developing markets as well as other categories of consumer durables in India.

This report highlights the current low penetration level of AC in India and develops a number of effective strategies the industry could adopt to accelerate growth and thereby increase penetration. These strategies relate to financing, innovation, communication and the selling approach. All of these strategies will need to be targeted appropriately to both existing and emerging customer segments:

To begin with, developing easy financing options for customers will bring air-conditioners within reach of a much larger percentage of the population. At present the high up-front costs of an AC are a major barrier to adoption for many Indian households. By following in the tracks of the automobile industry and making financing the established means of purchase, AC manufacturers will be able to increase penetration and accelerate market growth. However, simply providing the financing options is insufficient, the industry needs to communicate their availability and affordability more effectively.


1 AIACRA, Kanvic analysis

2 RAMA, Francis Kanoi, MarketLine, Businessworld - Marketing Whitebook 2010-11, Kanvic analysis

Innovation will also play a central role in spurring industry growth if it focuses on reducing the running cost of AC and increasing its benefits. Advances in technology will help improve energy efficiency and therefore lower the currently high running costs. This is particularly important in India where the traditional air-cooler offers a cheaper substitute for households at a time when energy prices are rising. Furthermore, by adding additional functions to air-conditioners like heating, innovation can address the industry’s problem of high seasonality by providing year-round benefits, while keeping the price-performance ratio aligned with customers’ expectations.

Simpler and more effective communication by AC companies will help customers overcome their current doubts about air-conditioners. At present AC manufacturers rely too heavily on industry jargon and exhaustive lists of technical features in their customer communication. This fails to illuminate the real benefits the customer will derive from their product and makes it difficult for them to compare different product offerings.

Improving the selling approach will help manufacturers to engage more effectively with the customer. In this area there are three major points for improvement: customer education, solution-selling and cross-selling:

Firstly, customer education will improve the level of awareness of the benefits of AC and help dispel existing customer concerns. However, customer education must not be limited to sales staff. Any employee who comes into contact with the customer, for example service staff, must be engaged in this process.

Secondly, adopting a solution-selling approach will unveil new ways to engage the customer. Rather than focusing on selling a product, companies should diagnose the customer’s problem and suggest the appropriate solution. For AC manufacturers this could mean conducting home surveys to identify a customer’s air-conditioning requirements.

Thirdly, cross-selling will allow air-conditioners to reach the larger number of customers who have purchased other white goods. Many AC players also manufacture other consumer durables, therefore they can use these existing sales and service networks to identify the need for an AC and recommend a suitable product to the customer.

To successfully implement all of these strategies AC manufacturers must have a strong understanding of their customer segments. The AC market is becoming more heterogeneous as new customer segments emerge. Industry players need to be aware of these segments and their specific needs and wants, and they need to tailor their


strategies in financing, innovation, communication and sales accordingly. In addition to the established customer segments of ‘price conscious’ and ‘efficiency seeker’, we have identified two new segments of ‘aesthetic design’ and ‘health conscious’ customers that are beginning to shape the market.



The low penetration of AC in India

The paradigm shift in the room air-conditioning market

The Indian air-conditioning market reached Rs. 17,600 crore in 2011-12, rising from Rs. 11,000 crore in 2008-09 at a CAGR of 17%3. The room air-conditioning market represents approximately 50% of the total market, with the other 50% comprised of central and specialist air-conditioning systems. The room AC market can again be divided into two sub-segments. On the one hand the residential segment which now constitutes a majority 60% market share and on the other hand the commercial segment which represents a smaller 40%4 (Exhibit 1).


3 AIACRA, Kanvic analysis

4 Francis Kanoi

The commercial segment consists of retail shops, hospitals, hotels, restaurants, commercial offices and educational institutes, while the residential segment includes those using air-conditioners for their houses and apartments. The commercial segment formerly represented the lion’s share of the market for room AC manufacturers but over the last decade demand has shifted toward the residential segment. (Exhibit 2)

The faster rate of growth in the residential segment has been propelled by three key growth drivers. Firstly, rapid growth in the stock of residential housing in India, particularly the supply of multi-storey apartments and modern homes that has dramatically increased the exploitable market for room ACs. In urban India around 3.85 crore new houses have come up in last 10 years from 2001 to 2011. Secondly, increasing household income has brought a range of consumer durables including AC within the reach of more consumers. India’s monthly household income has increased by 14.7% in 2011 to Rs. 20,555 from Rs. 17,918 in the previous year6. Thirdly a


5Housing, Household Amenities and Assets - Census of India

6 MarketLine, Kanvic analysis

progressive shift in consumers’ perception of air-conditioners from that of a luxury to a necessity is underway, as consumers become increasingly accustomed to air-conditioned environments at the workplace and in their cars.

Meanwhile in the commercial segment the smaller amount of potential space to be air conditioned and the increasing preference for central air-conditioning systems over room air-conditioners has resulted in a lower growth rate. Thus, the market share of the commercial segment halved from roughly 80% to 40% in 15 years, while the residential segment has trebled from only 20% in 1995-96 to 60% in 20117.


7 Francis Kanoi, OEM update, Kanvic analysis

A huge market remains largely untapped

In spite of the growing importance of the residential market, the overwhelming majority of Indian homes are still untouched by air-conditioning with the overall penetration rate standing at a mere 3.8% in 2010-11. This situation compares very unfavourably with the scenario in other developing Asian economies. The penetration of room air-conditioners is 8% in Indonesia, 50% in Korea, 53% in China, 72% in Singapore and 89% in Taiwan8 (Exhibit 3).


8 Euromonitor, RAMA, Francis Kanoi, MarketLine, Kanvic analysis

Closer to home, the wider Indian consumer durable sector is one of the country’s fastest growing industries with a CAGR of about 15%. The industry is expected to touch Rs.52,000 crore by 20159, fuelled by rising household incomes and increasing urbanisation.

However, in spite of this high growth trajectory, the penetration of air-conditioning will still be significantly lower than the level of penetration other white goods have already achieved today. Presently more than 77% of households in urban India have a TV, 33% have refrigerators, 17% have an air cooler and 13% own a washing machine10 (Exhibit 4).

Despite fierce competition and a sizeable market turnover in the room AC industry, the fact that 97% of Indian households are still untouched by room air-conditioners - while the adoption of comparable products have surged ahead - indicates that industry players need to adapt their strategies to fully realise this opportunity.


9 ASSOCHAM “Emerging trends in consumer electronics and durable industry”

10 Businessworld - The Marketing Whitebook 2010-11


Strategies for accelerating growth

Strategies for accelerating growth

To address the low level of room AC penetration in India, industry players should adopt comprehensive strategies. Based on our research, we have identified five promising axes of improvement (Exhibit 5) for the room air-conditioning industry. By adopting effective strategies along these lines, the industry can reach out to target customers to influence and strengthen their purchasing desire.


1. Develop and communicate easy financing options

The average price of an air-conditioner in India is Rs 30,000. This is still substantially more than the average monthly household income which currently stands at just Rs 20,555 (Exhibit 6). As a result air-conditioners remain unaffordable for a large part of the population.


Furthermore, the availability of cheaper substitutes like air-coolers renders air-conditioners less attractive for the mass market. The price of an air cooler starts from as low as Rs. 4,00011, far less than the average price of an air-conditioner. The penetration rate of air-coolers reached 17% in 201112, pointing out the high price elasticity in the Indian consumer durables market.

Providing easy financing options can help address the issue of affordability. By effectively boosting the purchasing power of a vast segment of consumers for whom air-conditioning is currently out of reach, the industry can unleash a wave of untapped demand. Realising this, most AC companies have recently introduced some easy financing options for consumers, offering a specific low interest rate and an easy payment process. For example, some manufacturers break the ticket price down into easy monthly instalments (EMI) for credit card holders over a period of 10 to 12 months.

However, simply introducing such payment options is no longer sufficient. They need to be conveyed to consumers through effective communication mediums. At outlets and in advertising campaigns brands are not effectively communicating the available financing options and consumers often have difficulty in obtaining the relevant information.

The low level of sales finance is a challenge across the consumer durables sector, with financing contributing a mere 5-7% of total revenues13. By contrast, the automotive industry has understood the leverage of financing options and it has quickly offered them to customers in order to expand their market. In 2011 around 72%14 (Exhibit 7) of cars purchased in India were bought on credit. Today, the possibility of buying a car on credit is ingrained in the minds of consumers. Air-conditioning players should follow this path, highlighting their financing options in their advertising campaigns to appeal to the large number of consumers for whom the high up-front cost of an AC is a major barrier to adoption.


11 Symphony Corporate Presentation

12 Businessworld - The Marketing Whitebook, 2010-11

13 Press clippings

14 Kotak Mahindra Prime

Indeed, such financing options can effectively target the burgeoning middle and upper-middle class consumer segments, which represent around 14%15 of the 242 million households in India (some 34 million households). These segments have the growing desire and increasing means to improve their quality of life. Products like air-conditioners that are designed to provide greater comfort appeal to the emerging aspirations of these consumers and easy financing options will be an effective way to convert these desires into actions.


15 NCAER, India census

2. Innovate to reduce costs and satisfy customer needs

Use technology to reduce the running costs of AC

Financing options will reduce the cost of the initial investment for consumers but the operating costs of air-conditioners are a significant deterrent to purchasing. Many customers prefer familiar substitutes like the air-cooler that have substantially lower operating costs. The energy bill for an air-cooler with its simple fan and water pump amounts to approximately Rs. 196 per month compared to Rs. 2,610 for an air-conditioner (Exhibit 8). Nonetheless, new technology and innovation have the potential to allow manufacturers to reduce costs and market affordable products to a larger segment of the population.


Due to the high price of energy in India, the operating costs of an AC represent a significant ‘hidden’ expense for households. To better inform consumers about AC running costs, the Bureau of Energy Efficiency (BEE) has introduced a star rating system for air-conditioners, highlighting the efficiency of products in terms of energy consumption.

Driven by both regulation and market forces manufacturers are developing and marketing technologies that decrease the consumption of electricity. For instance, inverter technology avoids peaks of electricity consumption and significantly reduces the running costs of the air-conditioner. But this existing technology is not sufficient to compete with the energy consumption of the substitute products in India. Therefore manufacturers should continue to prioritise energy efficiency and integrating new renewable energy technology (see below) in their research and development.


Regulation and innovation: the star rating system

This labelling programme classifies air-conditioners according to their energy consumption. The Bureau of Energy Efficiency (BEE) attributes between one and five stars to products according to their Energy Efficiency Ratio (EER). This star labelling enables consumers to understand the consumption of each product. The five star AC consumes the least energy while the one star consumes the most. According to BEE, a one star air-conditioner consumes roughly 31% more than a five-star product.

Mandatory since January 2010, the star rating system influences the purchasing process of consumers who are willing to increase their initial investment in order to reduce their electricity bill. This labelling system also shapes the manufacturers’ strategies as they strive to offer a competitive range of products with high star ratings.

Develop products that deliver convenience to customers

Only a few brands have developed convenient technology with clear and explicit benefits for the customer. For instance, Onida, an Indian company, has recently marketed the first air-conditioner which can be operated from outside the home. The user sends an SMS from their phone and the AC gets switched on, ensuring their home is cool from the minute they enter. This innovation caters to the real problems customers face and provides them with a clear benefit. Manufacturers have to develop this convenience angle further by offering simple to use technology with clear improvements for the customer. Furthermore, the technology used needs to match the expectations of specific customer segments.


Innovation at a glance: Solar AC

Solar powered air-conditioners could represent an efficient solution to reducing AC running costs, especially in India. Most parts of the country have about 250-300 sunny days per year and regions such as Rajasthan are endowed with some of the highest levels of solar radiance in the world. With major shortfalls in power generation and poor grid connectivity, the forecast economic and demographic growth will result in higher electricity prices. As a result international developments in solar AC technology could have great potential for the Indian market.

In this regard Ludivine Solar, a French company, markets a hybrid solar air-conditioner named Ultimate Blu Sun. The company claims it cuts electricity costs by 60% during operation, uses a non-polluting refrigerant, and decreases emissions of carbon dioxide by as much as 20 kg per year.

Furthermore, in China, solar technology has been applied to produce a fully autonomous AC. Gree Electric Appliances recently developed the

world’s first off-grid solar powered air-conditioning unit, running without any emissions or mains power supply.

Address seasonality concerns through year-round features

In addition to regarding air-conditioners as an expensive or luxury purchase, many consumers consider AC as a highly seasonal product, pointing out the sizeable initial investment for what may be a relatively brief benefit over two or three months of high summer. India’s diverse climactic regions and the seasonal extremes within these regions demand adapted technologies to extend the benefits of AC year-round. By focusing on their products as an air-conditioning solution rather than a cooling device, manufacturers can change the current perception of the product as a seasonal purchase and overcome a limiting factor on industry growth.

In this vein LG has developed a line of reversible spilt ACs which include a heating option. This technology allows consumers to use their air-conditioner during summer and the winter. Other manufacturers have also included a de-humidifier function for use during the monsoon season. Furthermore increasing health concerns around pollution, allergens and airborne bacteria offer yet further opportunities for players to increase the benefits of their product and diminish the seasonality factor.

While year-round functionality offers clear advantages to the customer, manufacturers need to ensure that their efforts in innovation are equally focused on delivering these new products at an acceptable price-performance ratio for the target customers.


3. Develop customer-friendly communication

Remove the jargon

Room air-conditioners are now primarily aimed at ordinary consumers rather than businesses, but many manufacturers are still using technical language to explain their features (Exhibit 9). Indeed the information about AC products is not provided in terms of benefits for the consumer but often in technical jargon that is incomprehensible for the larger part of the population.


For instance, one company’s brochure - which is typical for the industry - refers to ‘the MCC option’, the ‘BLDC compressor’ and ‘UTR technology’. None of these terms enable the consumer to clearly understand the benefits embedded within the product. Plus, if the customer decides to seek information directly online or in a brick-and-mortar store, they will have to compare the available products. However, the complex technical charts that are habitually used to highlight obscure performance data and technical characteristics that make comparison difficult and time consuming.

AC manufacturers should assume the perspective of their target customer rather than the perspective of their engineering teams to produce informative but jargon-free marketing material. For example, when referring to the noise level they could compare it to everyday products the consumer will be familiar and comfortable with - like a ceiling fan - rather than in decibels.

Focus on benefits not features

Manufacturers should market their products keeping in mind the language and the expectations of their consumers. Consumers do not seek a long list of features but concrete benefits which bring them solutions to improve their quality of life. Instead of highlighting numerous features, AC players should clearly define the benefits the product provides for the customer.

For instance, grouping a company’s offering of air-conditioners into a few simple ranges according to their main benefits to the customer could considerably simplify the purchasing process. Currently, it is difficult for a customer to identify the most suitable purchase according to their requirements because the range of products are not clearly defined and communicated to customers. Simplifying the product offering and aligning each product group with distinct customer segments according to the products’ benefits would make the decision-making process significantly easier.


4. Improve the selling approach

The selling approach adopted by a company is the cornerstone of its performance. In the air-conditioning industry the technicality of the product emphasises the need for a clear strategy in the selling approach. We have identified three points of improvement which AC players could work on to unlock the market’s potential. These are: customer education, solution selling and cross-selling (Exhibit 10).


Customer education

The technical nature of air-conditioners and their perception as high-cost are the two greatest factors standing in the way of raising customer awareness about their benefits. To deal with this situation customer education appears to be an effective solution. By educating customers, the air-conditioning manufacturer helps them gain insights about how their product better meets customers’ needs and expectations over a competitor’s product or a substitute. Companies can train their own sales staff and those of their retail partners to educate potential customers about their products and their uses. However, other employees who come into contact with the customer - such as service staff - can also play an important role. Manufacturers should re-educate and re-orientate all their customer facing staff to understand their role in marketing the brand and its products.

In addition to staff training and orientation, providing employees with simple tools can help them to diagnose a customer’s problem and provide the best solution. These tools can also be targeted directly at the customer. For instance BEE has introduced a mobile phone based application called “AC Power Saver” that enables consumers to calculate energy consumption and savings on their mobile devices. They have also created a dedicated web site – www.SaveEnergy.co.in – with all the necessary information including an energy calculator.

Focus on solutions not products

The days of simple selling are over, in the past decade the selling environment both globally and in India has radically shifted. The focus is more on solutions rather than products. In this shifting environment companies should adopt an innovative solution-selling approach to first stimulate consumers’ desire for ACs and then convert it into a final purchase.

For example, sales staff could conduct a home survey before suggesting a new product to a customer. They could first visit a customer’s home and conduct an in-depth analysis of the size of the space, the amount of sunlight and other relevant factors before suggesting the right product. While carrying out this process the sales person will have the opportunity to engage customers and build their trust in both the product and the brand.


http://www.SaveEnergy.co.in

http://www.SaveEnergy.co.in

Implement cross-selling

Cross-selling is a powerful and well-established selling approach. It is a proactive, ongoing sales process which seeks to provide customers with a full range of products and services. Most of the AC manufactures in India also produce other white goods or electronic items and these products are sold through the same distribution network or by dedicated sales and service teams. Companies can use their existing infrastructure to cross-sell air-conditioners.

For instance, a service person for products with higher levels of ownership - like washing machines or televisions - could identify the necessity for an AC while servicing or installing these products in the customer’s home. Their knowledge about customer’s other purchases would also indicate customer’s ability to afford an AC. Based on theses observations they can then suggest a suitable AC product and financing option to the homeowner.


5. Target new customer segments

There is often a mismatch between consumers’ needs and wants and the areas in which companies focus their efforts in product development, distribution and marketing. An organisation cannot create value for customers unless it identifies and satisfies their needs. In a competitive market, customer segmentation has become a cornerstone for successful companies. Those companies that fail to satisfy their customers’ needs often do so because they don’t have a clear picture of their target customers. Understanding the customer is equally vital for AC players if they are to increase the adoption of room air-conditioners.

Think beyond large cities

The presence of air-conditioning companies in India is concentrated in the country’s metros and other large cities. Over the last decade the major players have built a strong distribution network in these locations but have neglected smaller towns which they deemed less profitable. With India’s extraordinary level of development the situation is shifting and companies cannot overlook the tremendous opportunities in these emerging segments.

Indeed, the percentage of households in peri-urban16 areas in each income category is almost similar to that in urban areas. 57.6 million households in peri-urban India have an income above 3 lakh rupees per annum, making it an attractive target for air conditioner manufacturers. (Exhibit 11).


16 Towns with a population less than 1,00,000

Increasing incomes and changing mindsets outside urban India offer air-conditioning players a huge opportunity to leverage their current turnover and achieve a breakthrough level of adoption. By focusing on small cities and towns now, players are likely to catch the next wave of growth and promote their brands in a new and untapped market. Nonetheless, the specific characteristics of these consumers have to be completely grasped and the universe of potential customers needs to be accurately segmented.

The shift from a twofold to a fourfold customer segmentation

The Indian air-conditioning sector is undergoing a shift from a simple twofold segmentation of its customers to a more complex fourfold segmentation. Earlier AC manufacturers were presuming a more homogenous market landscape with only two major customer segments - focused on price and running costs. But the air-conditioning market - like many other markets - has become more heterogeneous with the emergence of new customer profiles. To achieve the next level of industry


growth companies will have to design their products and services around these new customer segments by catering to their exact needs and expectations. This will require not only the correct identification of their profile but a deep understanding of their behaviour. We have identified the four major customer segments that are currently shaping the market (Exhibit 12). However, industry players should be alert to the emergence of new segments as the Indian consumer evolves.


1. Price conscious

Consumers in this segment are attracted by low prices. Innovation and technology play a fundamental role in offering affordable air-conditioners by lowering the cost of production which can then be passed on to the customer through a lower ticket price. Currently, Haier and Onida are among the cheapest brands in the Indian market, focusing their research on providing affordable air-conditioners. Tapping this segment requires a strategy towards economies of scale with a focus on obtaining cheaper components and materials. However, the competition for this segment has intensified with the arrival of Korean and Chinese players with their global production chains and portfolio of low-priced products.

2. Efficiency seeker

In recent years a focus on high energy costs and ecological issues has driven consumers toward more energy efficient products. Many companies have introduced air-conditioners endowed with inverter technology that has shorter motor run-time and therefore consumes less electricity. Although energy efficient products are relatively more expensive than standard variants, a large number of consumers are choosing them to reduce long-term costs. The choice of these consumers will be shaped by the published energy consumption of the product and its star-rating label given by the BEE. Alongside clearly displaying the running costs, manufacturers targeting this group could compare their products with those of less efficient older models to demonstrate the falling running costs to wary consumers.

3. Aesthetic design

This segment of consumers is seeking aesthetic and customisable products. Aesthetics play an increasingly important role in Indians’ choice of products as they become increasingly conscious of interior design. The decorative paint segment for example has recorded an 8% average growth rate over the last five years17. With this aesthetic trend, consumers are increasingly choosing air conditioners which suit their home interiors. In order to tap this growing segment, manufacturers should offer wider ranges of colours and more discrete designs that help the product blend in with their home decor. Whirlpool for example has developed an innovative digital tool that enables the user to recreate their interior online in order to find the model of AC that most suits their aesthetic preferences.


17 Snapshot of Indian coatings industry 2011, Indian mirror

4. Health sensitive

Another trend that offers many opportunities for the AC industry is the increasing focus on health and well-being. Indian consumers are becoming more and more aware of safeguarding the health of their families and are seeking items which provide concrete solutions. Hitachi has quickly recognised this trend by introducing the i-Clean system. This technology automatically removes the dust accumulated on the AC filter that would otherwise be disbursed into the room.

Along similar lines Samsung markets a range of air-conditioners with «Virus Doctor» technology which eliminates air-floating particles such as bacteria and viruses. This is increasingly relevant with the recent H1N1 epidemic and the increase in allergy cases due to increased air pollution. To be credible however, this technology must have certifications and labels. For example, Samsung is working with academic research centres in order to prove the efficiency of its technology. Manufacturers could take this approach further by seeking endorsements from panels of doctors and other experts in respiratory diseases.


Conclusion

India’s room air-conditioning market with its current low penetration rate offers huge opportunities if the industry understand and cater to the shifting needs and wants of Indian consumers. The penetration of other white goods at comparable prices is substantially higher, pointing out several shortcomings in the current strategies of the major AC players.

Through working along the five axes of improvement we have highlighted, manufacturers have the opportunity to turn-up growth in the coming years. Better financing options, well-directed innovation, new approaches to selling and more effective communication can all be developed and effectively implemented through a better understanding of established and emerging customer segments.

Manufacturers should not rely only on the strategies and customer segments that were sufficient to drive growth in the past. As Indian customers become more heterogeneous, persisting with the old approach runs the risk of neglecting the needs of an ever larger number of consumers, and thus hindering overall industry growth.


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