Assess the business case for Chotukool. What are the critical success factors for their product to succeed?
Godrej and Boyce’s product-Chotukool is an example of Disruptive Innovation. Disruptive innovation, a term of art coined by Clayton Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.
Companies often take existing products developed for mature markets and pull out features in an effort to reduce costs and re-design the product for use by consumers in cost-sensitive markets. One objective of disruptive innovation is to remove barriers to consumption. Chotukool, a cooling product is one such low-cost solution for non-users of refrigerators especially in the rural areas. This product was a success and there are various reasons for that, they are:
- It was designed for rural India. Refrigerators had immense utility but the rural folk didn’t buy refrigerators. They had various reasons but there was scope for innovation here as the market penetration for refrigerators in the villages was only two percent in 2007. This product was made keeping the rural folk and their needs in mind.
- When it was launched it was the cheapest product. It offers cooling solutions at a very cheap rate i.e. Rs. 3500. Such a price was very attractive as it was fifty percent lower than the cheapest refrigerator.
- Chotukool has an impressive product design. It was portable as it weighs 7.8 kgs and is 1.5 feet tall and 2 feet wide. It runs on 12 V battery power and can carry a weight of 30-40 litres.
- The product also has a unique feature of staying cool even without power. This is a very useful tool in rural areas where there is a shortage of power.
- Godrej involved the villagers in almost every stage of production and marketing. This created awareness and promoted the product effectively in its taget market- the rural areas. From the field search to the selling Chotukool was a product which involved the rural folk
- It partnered with NGOs like Swayam Shiksha Prayog to create trust among entrepreneurs to distribute the product.
What criteria should Godrej use to evaluate it’s strategy of launching. Chotukool. Should Godrej invest in this business or not?
The criteria that Chotukool should follow to evaluate its strategy of launching Chotukool should be: Pricing: Rural India is a different market. The needs and wants are different and so is the income. Therefore launching a product in such a market would require a proper pricing strategy. Creating Awareness: Godrej’s product was new and creating awareness in rural areas is always a challenge as there is low literacy etc. Diversity and different cultures pose different challenges.
Reaching out to customers: Godrej’s focus for Chotukool were the rural market and reaching out to them in terms of promotion and distribution wasn’t easy as building trust among the rural folk was important. Distribution Channel: Creating an effective low cost distributive channel in a new market was tough for Godrej. For this they had to have key insights of the market. Also creating a market making the consumers who were largely non users of refrigerators into a potential consumer. The decision of investing in the rural market should be based on the opportunities and threats in the market.
Is there a threat of quick imitation by competitors that Godrej should consider if so how?
Innovation drives our industry, attracts the best talent and wins fame for its leaders. Innovation leaders burst onto the scene, win early market leadership, but sometimes cannot sustain the pace. Imitability refers to how easily competitors can copy or duplicate the technology or process underpinning the innovation.
There are many examples of barriers a company could use to protect itself from imitation, including intellectual property rights, complex internal routines or tacit knowledge. Godrej and Boyce’s Chotukool also has a threat of substitutes. The locally made ice boxes and also other products like ‘Mitticool’. ‘Mitticool’ is a product made out of clay which costs around Rs. 2000. This product too didn’t operate on electricity and therefore it had no operating cost.
What is your take on simultaneous pursuit of two parallel business models in same cooling solution industry (Rural vs. Urban)? Does it entail any risk for Godrej?
Having a presence in both the markets is an advantage but having two parallel yet business models can be risky for any company. The market penetration for refrigerators in the urban market was 18 percent and in the rural market it was 2 percent. Hence the untapped market was huge.Godrej Chotukool is a product made for the rural areas of India. It was made according to the needs of the rural customers. There are various advantages in being present in both the markets but the marketing approach for the areas are different. This makes the marketing strategies different for different areas. When the marketing strategies vary the product may suffer.
The sales may be affected and the focus or the target market may be confused. Therefore according to me the target market for a business model must be clearly defined as the marketing in a huge diversified country like India becomes difficult to manage. But as the presence in both the markets is an advantage Godrej must control the price differences and the marketing strategies must be planned well too. Also being present in both the markets with the same product would call for different promotional strategies. All these factors play an important role in the success of the product sales.
How should Godrej pursue its strategy for Chotukool? What are implications of brand and overall corporate strategy?
The Chotukool idea was conceived at a workshop with Prof. Clayton Christensen, world’s foremost authority on Disruptive Innovation (DI). Chotukool, a cooling product is a low-cost solution for non-users. The focus of development of Chotukool has been on the job / context – it is designed for people living in a one-room house, with no big need for ice; instead, it seeks to provide the right features and adequate functions. The Strategy that Godrej should follow:
The marketing team must follow a unique strategy in terms of pricing and features of the product. The product must be available and understood by the target market well. Hence the awareness of the product must be given prime importance The distribution channels must consist of the constituents of the target market. The product must create an identity for itself. This calls for extensive and effective marketing strategies.
The Implications of the brand:
The brand Godrej describes this product as “ChotuKool, a re-imagined household solution is a project driven by an innate passion to achieve a vision beyond profit.” With the launch of such a product Godrej has reinvigorated growth in its venerable household appliance business. This product is promising and therefore the ‘Brand Godrej’ benefits from the response as well as the utility the product creates. Godrej, because of it’s success in this endeavour can expand it’s business and build up on the new market created for themselves in the rural areas where it did not exist earlier.
Overall Corporate Strategy:
Chotukool was a product of Disruptive Innovation at Godrej. The concept was new and the strategies too for Godrej. Hence the overall corporate strategy was a carefully planned one. First Godrej conducted research with Disruptive Innovation in mind and designed Chotukool.
A good field study of its target market that is of the rural area gave the target market for the product. Effective analysis helped in adding useful features to Chotukool which are required by the rural people. Smart pricing and effective promotion involving the rural people created awareness for the product. Distribution channels were also arranged with the help of local NGOs which helped in building the trust required by the consumers. Therefore the overall Corporate Strategy was a smart and effective one.
What challenges do you envisage for Godrej in its journey of taking. Chotukool to various geographical markets across the country?
After the success of Chotukool in the initial target markets of Maharashtra’s rural areas, Godrej had plans of expanding its Chotukool operations to different geographical areas in India. But there are certain challenges which Godrej needs to keep in mind that may arise while it considers expanding its operations abroad.
They are:
- Product Design: Chotukool is a small product with a capacity of 30-40 litres. This feature can be changed in its new different models. Maintaining its other features and changing some could be difficult. The product design must be tweaked for different markets in India as some rural areas prefer more features and some less. This also depends the climatic conditions and lifestyle of the area.
- Promotion: The approach used to promote Chotukool in its first villages was to involve local NGOs to distribute the products and build brand trust. This approach may not work in all the villages or rural areas. Therefore Godrej must come up with new ideas to promote Chotukool.
- Distribution: this aspect needs to be changed as the same strategies may not work and Godrej may have to build the brand trust itself by establishing itself well in the villages it aspires to target.
- Pricing: The pricing too will have to change according to the expansion plans as the expenses would rise and the revenue would not be enough.
- Identifying new Markets: This is a difficult challenge as Godrej would have to spend a lot of its time and resources to get a clear picture of its potential market. But the same work would help Godrej in focusing on its primary objectives.
