Marketing Case Analysis - Tata Steelium

GROUP H:
ARVIND SHARMA
JATIN VIRDI
RAVI CHAND
SIDDHARTH SHAH
SHAILAV PRAKASH
ULLAS ANAND
Introduction:

Brand is a concept that exists in the mind of consumers [1]. Perhaps this could have been
the thoughts when Tata steel decided to launch world’s first cold rolled steel (CRS) by the
name ‘TATA Steelium’. Even before the launch of this brand, Tata group was the oldest,
largest and one of the most respected corporate house in India. With Tata steel being one of
the flagship companies of the group, already had a commercial presence in around 50
countries.

The basic idea was to create a brand out of a commodity. Branding inevitably leads to
commodity differentiation and hence creates customer preference. Tata already is
considered as one of the most trusted brands of India, therefore if it brands a commodity
such as Steel the customers will automatically prefer Tata Steel in situations where choice is
available between products which may provide almost equal benefits.

Technology Selection:

Before investing in the technology that can give it an edge over its competitors, Tata steel
took the first step in the right direction by accessing the demand in the marked and
identifying supply gaps. It is also important to analyze if the consumer is willing to pay for
the new technological solutions. This can be summed up by the statement “A demand
based perspective can offer new insight into core question such as competitive threats and
assessment of technological maturity” [2]. From the table 3, we can see that all the
innovations that Tata steel brought in the production of steelium gave the consumers an
option to for a superior quality product like better shape, less damage in storage etc. These
were the quality upgrades from the existing products in the market for which consumers
were willing to pay.
Importance for Retail market of CRS and Branding:

With the market divide equally among those buying in bulk and retail, it was important for
Tata steel to give both the sections equal importance to achieve its sales target. The
strategy of using its own sales force to cater the need of the large consumers can be
considered as a good one. However most the competitors were also doing the same.
However, while the competitor taking care of only their biggest buyers, Tata steel decided
to cater for the low volume buyer too. Tata steel mostly relied on the brand name along
with the help of some intermediaries to establish themselves as the leaders of this segment.
This can be considered as the example of company relying branding to establish itself.
However the challenge here was to supply product of superior quality to complement its
brand name. From the technological selection of Tata steel we know that they should not
have any problem achieving a brand name for the product.

Customer opinion:
With their Technological selection, Retail marketing strategy, branding of steelium Tata steel
managed to solved most of the problems consumers previous had with the other products.
With their superior technology they created an in-house product that not only solved the
problem of application, a common complaint with the other product, but also took care of
their pricing needs. Then, with only intermediaries in between them and the small
consumers, they managed to shortened this distance so that the consumers got the relief of
being listened. Now the customer need not have to roam from shop to shop or compromise
on the quality of the product. The branding strategy ensured that customers could now
identify the quality of the product easily and could rely on it as well.

- We can observe that the major reason for the launch for Tata Steelium was growing
customer dissatisfaction for the following reasons:

i) Superior quality CRS was beyond the reach of the small customers. Several processes like
heat treatment, cutting, welding was necessary before the use.
ii) Customers had little access to the manufacture of CRS. Adding on, the retailers did not
entertain quality complaints as they themselves did not get any support from
manufacturers.

iii) Identity and quality of CRS purchased from the retailers was doubtful. Small customers
had no option but to rely upon them.

To target dissatisfied customers the following initiatives were undertaken:

-Introduction of choice of grade and size thereby giving wide variety of applications
undertaken by small customers.

- Unique packaging which is considered as important criteria from the customer’s

viewpoint.

- Even though TATA Steel sales force may be limited however by branding their product they
are able to nullify this shortcoming and are able to reach to the small customers much more
effectively compared to the penetration achieved by their sales team.

-Targeting of B2C and B2B separately as the customer requirements vary drastically. One
can also say that branding was introduced by Tata Steel to tackle the issue of Seasonal
variations in demand of steel.

Thus we observe that, Branding Steel would help Tata Steel in two ways:

i) It would help to stabilize the flow of revenues even during business downturns.

ii) It would make premium pricing possible. TATA Steel was confident that by providing
quality , post sale service and service support from all channel member it would be able to
justify its premium charges.

TATA Steelium intelligently catered to these issues of the customers by:

-Ensuring product availability

-Continuous and high levels of service to customers

- Product and service-level customization

Developing Distributor/Dealer Network:

TATA Steel has been selective in choosing its dealers by having various screening tests.
Needless to say that TATA Steel has ensured that it will keep tight check on its distributive
channel and will ensure support and service culture.

Infact it is Win-Win situation for both of them. Distributors will also want to associate with
a TATA due to their brand image, thus increasing their chances of attaining higher margins
in turn. Further their monitoring system which included distributors and dealers ensured
that they are able to constantly get the market review and customer pulse.

We can see that there existed a long supply chain between consumer and manufacturer,
before the introduction of Steelium. This left the consumer frustrated due to various
reasons like the habit of wholesaler and retailers to buy cheap and then sell it for a
maximum profit, lack of retailers in the nearby locations because of the reluctance of
wholesalers to venture into the new markets, no value added service provided by the
retailers, hard bargaining, etc. Steelium decided to take advantage of this situation by
shorting this supply chain and attract the frustrated consumer who were looking for a
relief from all this. This was helped by the fact that steel prices had started to stabilize at
that time and retailers were looking for stable margins. With steelium Tata steel provided
exactly that. With the brand name driving the sales and the shorter supply chain and quality
product keeping the consumers happy, it was a win-win situation for all the involved
stakeholders.

Critical Action Areas:

As mentioned, maintenance of professionalism is one of the critical challenges for the

company. One of the possible solutions could be to introduce various training programs for
all the sales employees to be time to time so that they can remain focused and understand
the importance of the brand name. Workshops can be conducted for the dealers and
supplier at the regional and national level so that they can be taught the importance of the
value proposition of the business. This will also help in keeping a check on the retail prices
set by the dealers and suppliers and also help in understanding the consumer need so that
step can be taken to not only improve the quality of the product, but also give an idea as to
which technologies it is further required to invest.

Future Strategy :

1. A model for Co-ownership of a B2B brand to co-create Superior Value for B2B
customers.
 The point here is to make everyone have the feel of the ownership of the steelium
brand by giving inputs and and asking for customized product. Customer has the say
about the size, shape and quality. Distributors can get the inventory plan and the
training help from the company owner.

2. Tata Steelium must ensure that they keep claiming on the premium added with the
brand. It is clearly mentioned in the case that the service component and the brand
is valued by the class of customers who have been rewarding the company with their
loyalty and premium.

3. Tata Steelium should have tailored strategy and communication for long-term
relationship. Tata Steelium should leverage its relationships to enter into long-term
contracts with the distributors and the small consumers. It should move forward
from the tonnage-driven culture to a value-driven culture.

4. The company should try and penetrate in the small and medium-sized towns which
are relatively untouched by the competitors so far. These places are the
consumption centres of future.
 5. Limited capacity of the plant and a single location of manufacturing are constraints
to meet future demand and geographic reach. Manufacturing facilities at new
geographical locations in India can be explored to expand the production capacity in
order to meet the demand and leverage on the existing brand reputation of Tata
Steelium.

6. Steelium has to differentiate itself on service delivery which is a dealership activity. It

can leverage its head-start in the market and customer intimacy to develop and
deliver service differentiators. Targeting the specific end-user segments would be
critical.

SUMMARY:

Customer Market Value Distribution Branding Communicatio Future Challenges

Segments Opportunity/ Proposition Strategy / n and
Existing issues Product and promotion
pricing
Large No powerful High-quality Direct
Customers (> brand exists. product Distribution
60-1500 At times Long-term
tonnes). customers strategic
0.4m tonnes buy in even plans with
per year larger Customers
quantities.
Small  Consumers Providing  Served  Choice of  For B2B,  Increased
Customers (< served by complete through different promotion competition
60 tonnes) wholesaler peace of distributo grades and not through from likely entry
s and mind in rs - sizes traditional of Essar Steel,
0.4m tonnes neglected purchase and  Networks  Ensured advertising, SAIL, Jindal and
per year  Existing consumption of authenticit but by international
CRS not to the small Wholesal y through direct mails, players like
suitable for customer by ers and embossed brochures POSCO, Mittal
deep dealers. logo after and Steel.
drawing,  Assured  Develope every 1 m. information  Limited
bending, availability d an  Impermea through production
forming  Excellent organize ble and distributors capacity in wake
and artistic quality and d highly  Emphasis of rapidly
uses Customizat distributi protective on increasing
 Import ion of size on packaging. recruitment demand.
beyond the reflected network  Each and  May not be able
reach of through for retail packet developmen to command a
small slogan marketin carries t of premium on the
 consumers ‘Help g of CRS. important distributors’ price in future.
 No access Shape  Tightly informatio salespeople.
to Your controlle n like  Distributor’s
manufactur Dreams’ d grade, capability
er of CRS,  Dealing distributi size, enhanceme
quality with a on weight nt by
issues not profession network etc. improveme
entertaine al by  Pricing nt of supply
d by organizatio handling done chain
retailers n inventory based on efficiency,
 No guard  Provided for customers TOC and
against value distributo ’ perceived HRD
selling of added rs, value initiatives.
inferior support collecting  Introduce
CRS sold by services to sales d floor
dishonest the data, price to
retailers. customers introduci ensure
Customers (by ng distributor
felt developing complain ’s margin
powerless service t-
against centers at handling
them. distributor’ and
s order
premises) manage
ment
processes
.

References:
1. Why Brand Matters - Laura Pasternak, Principal and Chief Brand Strategist, MarketPoint, LLC
2. A demand based perspective on technological life cycle – Ron Adler