How did Tanishq capture the Indian Gold Market?
Tanishq is one of the most incredible brands in Indian business history. In the last 20 years, the stock price of its parent company Titan has shot up by 33,000 per cent, going from just 7.11 rupees to 2,700 Rupees, and a mere 10,000 Rupees invested in Titan years back would be worth a minimum of 35 lakh Rupees.
Now, although Titan has a lot of brands under its canopy, the jewellery division accounts for 75 per cent of its total business, so by 2021, Tanishq generated a net sales of 20,600 Crores, and today it is one of the biggest Jewelry sellers in the country.
So, how did Titan turn Tanishq into such a huge brand? What were the business strategies that enabled them to disrupt the orthodox gold market of India, and most importantly, what are the lessons that we need to learn?
This is a story that dates back to the late 1980s. By this time, it had been four to five years since the Titan brand had started, Mr. Desa and his team had built an incredible company for the Tata’s in the Tamil Nadu Government. After cementing Titan’s position in India in the 1990s, Mr. Xerxes wanted to take Titan to the European markets.
However, this proposition did not take off at all. Why? Because the European watch market was crowded at all levels. At the low end, they had local brands. In the middle, they had Japanese Companies like Senco, and then at the top, they had Swiss brands. So while sales of west Asia and the Asia Pacific were good, the Euro business was incurring losses, and eventually, that division had to be shut down.
But you know what? This is where Titan suddenly decided to sell Jewelry in Europe. Now the question is; Why would a watch company suddenly start selling Jewelry and that too in Europe? Well, that is because something crazy happened in the Middle East during that time.
The United States had recently invaded Iraq after Saddam Hussein’s invasion of Kuwait. During the build-up invasion, Iraq and Kuwait had been producing a combined 4.3 million barrels of oil a day. But, when the war tension started rising, it led to the 1990s Oil shot, wherein the price of Oil shot up from just 21 barrels at the end of July to 46 dollars per barrel in mid-October.
This put nations all across the world in deep trouble. In the case of India, since we imported Oil and paid for it in dollars or Forex, high prices caused a significant burden on our Forex Resources By June 1991. India had less than 1 billion dollars of foreign reserves left which was just enough for three weeks of Input. This was a situation even after substantial borrowing from the IMF (International Monetary Fund).
So during this time, any company that wanted Forex had to generate it entirely by themselves. In simple words, India said if you are a business that wants dollars, don’t come to India for exchange because we need to buy Oil. If you’re going to do any kind of Import, earn or borrow dollars from someone else and then spend it entirely yourself.
In the case of Titan, they needed dollars to Import their watch components. So they started selling jewellery with the goal that they would make and sell Jewelry in Europe, earn Forex, then use the money to import watch competence, then use these components to make more watches in India and then sell them all across the world.
But this is when liberalization came into effect in India in 1991. As a result, India’s IT companies like Infosys and Wipro started bringing an enormous amount of Forex. Eventually, the oil shop faded away, and Titan began to focus on the Indian Markets under a different Brand Name through another Jugadu Method. An iconic Indian Brand was born, which we all know today as Tanishq.
Now, Mr. Desai and his team pursued the Jewellery in India while visiting a jewellery exhibition at the Taj hotel. They made three crucial observations;
(1) The Indian household was highly passionate about Jewelry because it was an investment and not an expense, and even an orthodox family did not mind spending tens of thousands of rupees on Jewelry.
(2) The jewellery designs in India were highly mediocre, and the purity of Gold was quite questionable. This was because impurity was a perfect way for the local jewellers to expand their margins and make tons of profits
(3) Despite having such an enormous demand and a customer lifetime value of lakh, the margins on Gold were extremely high because of both appreciation in value and, more importantly, cheap labour.
This is what propelled Titan to enter the jewellery business. Now by the look of it, because Titan had the cash for the Tata’s and the expertise to get world-class tech, it looks as if it must have been easy to crack the jewellery market of India. Well! not really. In fact, Tanishq was a loss-making unit in the initial few years. At one point in time, the condition was so bad that they talked about selling it off.
This happened because of two primary reasons;
(1) The Indian Jewelry market was firmly established with organized players. Why? Because the only Jewelry Indian families trusted were the local family jewellers. I mentioned, Local and Family because if you ask your parents, they’ll tell you that even your grandparents and their siblings are brought from the same jeweller.
(2) The 22-carat hold was the de-facto standard back then. This is where you have a product with 91.6 per cent gold and 8.5 per cent alloys. But Titan started with 18, Carat Jewellery. This was because the 18-karat studio would not get scratches quickly and would give the gems and stones a firmer grip.
This way, they could focus on innovative designs with Jewelry. But guess what? In India back then and even today, the plan was secondary, and the proportion of Gold was primary. Why? Because Gold for Indians was an investment, not just a piece of jewellery. So the weight of Gold, the importance of the diamond, making changes, and the appreciation value mattered to the Indian buyers, and they didn’t mind simple design.
As long as it had more gold, this is when Mr. Xerxes and his team decided to introspect Tanishq very closely. So immediately, the pricing system was changed. The price tags now display the Gold and gem details that explain each product’s price to the customers. Overall the focus shifted from design to purity and value.
This was when Tanishq made a game-changing investment into something called the Carat Meter. This investment completely changed Titan’s game forever. To tell you about it, as we had discussed before, most families in India trusted one family jeweller who had been selling them Gold and other jewels for 20 to 30 years. Still, at the same time, Tanishq jewellers were adultering the products to an extent, and an ordinary man cannot actually differentiate these intricacies. This is something that you cannot just tackle with marketing campaigns. This is where the karat meter came into existence.
The karat meter was a virtual machine from Switzerland that actually used spectroscopy to mean the purity of Gold. This machine was installed in all Tanishq outlets. After that, Titan launched a special Campaign wherein they invited customers to walk in with any piece of Jewellery and measure its purity for free now.
Since Gold was significant to Indians, people flocked to these stores to check the purity of the ornaments they had brought from their family jeweller out of blind trust. And guess what majority of people were shocked to discover that they had been cheated by their jeweller for decades, and this was because the Gold was not as pure as the jewellers claimed.
When lakhs of people felt betrayed or dissatisfied with their jeweller, Titan deployed another strategy called the 1922 scheme. Women could bring in their gold jewellery and test it in the carrot meter, and if the purity of the Jewelry was lower than 22 Karat and higher than 19 Karat, it could be exchanged for Tanishq 22 Karat jewellery of their choice by paying only the manufacturing charges and Tanishq could bear the cost of Gold.
This was Titan’s customer acquisition strategy. Now, although it might look like Titan was drawing cash by paying for the Gold, what we Missed out on is the fact that when it comes to Jewelry, the Customer’s lifetime value goes to lakh of rupees, and if done right, just like local jewellers you could be looking at customers from three to four generations of the family.
As a result, when this 1992 strategy was executed, Titan was very cleverly able to uproot the blind trust and acquired lakhs of customers from across the country. This is how Tanishq laid the foundation to build its brand as a synonym of faith and purity, And as a result, well! By 2023 the jewellery division’s operating income increased from 267.66 crores with Profit before Tax at 5.37 crores. This is where Tanishq’s rise as a blockbuster brand began because it has tackled one of the essential batteries of customers, the Barrier of Trust.
This is when they further moved ahead to tackle the second Barrier, which was the Barrier of cost. After the Karat Meter Strategy, Tanishq found another goal in the market for expansion. They realized that with their branding efforts, the middle-class Indian family started to perceive Tanishq as a brand that was too expensive for them. From the cost standpoint, a middle-class family that wanted to purchase Gold could not sell 6 to 7 lakh at once.
But at the same time, the desire to buy the set was there because, after all, it was an investment. This is where Tanishq launched the famous gold harvest investment scheme to buy Jewellery. In this game, if you wanted to buy a gold chain worth 2.4 lakhs and you didn’t have that kind of money now, you could actually deposit 20,000 Rupees per month for 11 months with Tanishq, and then Tanishq would pay your 12th instalment of 20,000 Rupees, at the end of the year you would have 2.4 lakh Rupees to buy your gold chain.
This is almost like a SIP for Gold, and if you didn’t want to buy Gold after a year, you could get the money back with the discount voucher for the additional amount. This is how the Barrier of the cost was brought down. As a result, Tanishq became more accessible to the middle-class population of India. Eventually, they tackled yet another significant barrier which was the Barrier of cost.
Lastly, what I personally love about these classic brands is that they often consider one factor that no other brand believes in order to identify intricate gaps in the market, and this is the factor of Empathy. In this case, Tanishq actually observed that working women didn’t want to wear ornate Jewelry to work because it looked too flashy. At the same time, they wanted something affordable, Elegant, and easy to wear. So Tanishq launched the “Mia collection” that specifically addressed this audience segment and started their pricing from 3,999 Rupee onwards.
Then, they also found that the wealthiest people in the society, who had the purchasing power, wanted to buy unique designs which would distinguish them from the crowd. So they launched the ”Zoya Collection” that starts from 70,000 Rupees and goes all the way up to 70 Lakh Rupees.
Then they also saw the digital wave rising, so Titan invented Karat lane in 2016, which is an online jewellery company. In fact, even today, if you go out in the market and you try to examine the competition of Tanishq, you will see that there are very few brands that actually cater to so many categories of the audience like executive, Ultra wealthy traditional minimalistic designer, etc. this is how Tanishq evolved to become one of the largest Valerie sellers in the country.
Lessons 1
There is a thin line between what you think your customers like and what they actually want. So always do your market research thoroughly before stepping into the market. The most poweryway to do that would be to study data and then go and talk with the people to understand the story behind the data. The point we noted over this is talking to people is more important than analyzing data.
Lesson 2
Sometimes you have to make people aware of the problem before providing the solution. In this case, although people are buying impure hold, the blind trust of the local jewellers needed to be broken in order to establish the informed trust by Tanishq. This is where Titan’s karat meter came in handy.
Lesson 3
Lastly, remember that superpower can turn a commoner into a kind. In this case, a constant market assessment done by the Tanishq team gave them million-dollar assets in the form of Mia and Zoya collections. So always remember to keep updating yourself about what your customer needs otherwise.
Article proofread & published by Gauri Malhotra.
