Hero Cycles

Growing the tree, not manipulating its shadow

 

In 1986, The Guinness Book of Records listed an entry about India that few realized then, was a portent of times to come in the world of business and economic balance. Until then India featured with quirky, amusing slices of life that reflected perceptions of the world about it. E.g. for many years, Guinness had recorded that the longest moustache in the world belonged to an Indian.

In 1986, Guinness recorded that an Indian company, Hero Cycles, had produced the largest number of bicycles in the world in that year.

The owners of Hero cycles, justifiably proud of their achievement, decided to let India know of this fact – in style. In the words of Mr. O.P. Munjal one of the founders of Hero Cycles, “As India’s number 1 bicycle company, we decided that India’s no. 1 publicity company should announce this achievement”.
Hindustan Thompson Associates was therefore requested to prepare a campaign to this brief. It created a new “contemporary” logo for Hero Cycles with a “No.1” graphic affixed to it, matching the “contemporary” aesthetics of a new print campaign. With its release, in those days of understanding of branding, a brand was re-born.

Two significant meetings took place in the year that this campaign ran, and the points stressed by Hero’s founders were:
• The index of steel prices had been higher, historically, than the index of Hero Cycle prices.
• Key competition – Atlas, Hercules, Philips and BSA – was able to pass on the price rise to cycle dealers, who in turn, passed it on to consumers, but Hero faced stiff resistance from the same dealers whenever it mulled a price rise.
The Agency’s analysis was: Low pricing had driven Hero Cycles to its vaunted “No.1” position in terms of volumes, but the consistency of low pricing had resulted in positioning its brand in a trap that would steadily erode profitability in the long run. (Exactly the problem that Chinese products now face)

The Agency conducted research wherein one consumer statement summed it up, “If it’s a cycle for my son, I will buy a BSA or Atlas, but if it’s a cycle for the domestic servant, I will buy a Hero”

This confounded the client because:
• 90 % of all cycles bought in India were the common “Roadster” type (“bought for the servant”).
• The manufacturing of cycles was essentially an assembly process where key components– steel tubes, ball bearings, rims, wheels, chains, sprockets etc. – were bought from suppliers common to all cycle brands in India.
• So, in effect, there was no difference in the product of each brand – especially the “Roadster” type that was the backbone of the cycle business in India.

• So why were consumers willing to pay more for an identical product with a different “label”?
The Agency suggested that an opportunity be sought where Hero could persuade at least one segment of consumers to pay for a Hero product a price that was at par for a matching product by BSA or Atlas.

Atlas created this very opportunity in 1987 – by launching India’s first 10-speed, geared, sports cycle. The Agency persuaded the client to allow an experiment – to create a matching product that could command a matching price. The client stated that such a product already existed in its portfolio, but sold in very small numbers.

The Agency benchmarked this product against the Atlas Concorde in casual “product clinics” in parks where young boys rode their cycles for pleasure after school.
The result was a unanimous preference for the Atlas Concorde over the equivalent Hero “Racer”. When asked why, the responses were, invariably:
• It was “the latest” because it had 10 gears
• It looked fast, and made the rider feel and look like a racer.
• It had a smart, attached, plastic water bottle with a drinking spout, a “racing” seat
A month after the launch of the Atlas Concorde, research was conducted with its actual users. Full of pride of possession of a (by then) iconic product, the owners were the cynosure of boys who had not yet got one. When given the Hero Racer to ride, some refused, while others who did felt it was not “as good”.
When probed, they again listed the Concorde’s gears and looks – even though, strangely enough, most of them had bought a version without gears. The reason was obvious – opting for ten-speed gears added almost doubled the Rs. 1000/- price of the base (single-speed) version – a premium that parents were unwilling to pay.

HTA then assembled a similar cycle in its studio, using components matching those of the Atlas Concorde, but packaged in a unique, contemporary colour scheme, and a new name, HERO HAWK, with a “Hawk Head” graphic as its logo. When shown to the same set of boys, their response was, “How much is it? Where can I buy it?”

The presentation of the project to the client was equally simple – the prototype was put on the conference table before the meeting, and his first reaction was, “Is this one of ours?”.
The Agency’s response was “It can be, if you wish”.

The Hero Hawk was launched soon after with a campaign that cost less than the preceding “No.1 Worldwide” campaign, but had a greater impact:
• Hero’s retailers, over 4000 in number, who were usually the company’s barometer of change, were unanimous in saying that this product was tangible proof to their customers that Hero was “No.1” worldwide – in every respect.
• Urban dealers eagerly placed orders with Hero – something they used to do only with Atlas or BSA for products of this, the “fancy cycle” type, as they termed it.
• The dealers representing rural markets that had poor or no roads, and where 90% of Indian cycles – the roadster type- were used, felt that the product would, at best, be symbolic in their markets, with no effect on their business.

• The campaign, unlike the preceding brand campaign, however, paid for itself in terms of sales in a segment where Hero had not treaded so boldly before.
• More important, Hero Hawk was priced at par with Atlas Concorde, and faced no resistance from dealers and, logically therefore, none from consumers either.
A few months later, BSA provided a hint of times to come. As the dominant brand in the “fancy cycle” segment, it had, for the first time, been repositioned as a laggard by Atlas and then Hero. Not for long though, as it launched its own version, “Mach1”, soon after. The response was, for the first time, less encouraging for it, not just in terms of sales, but also in terms of pricing – consumers were unwilling to pay more than the price of Atlas Concorde and Hero Hawk. For the first time, the Hero brand was a benchmark in the cycle market, albeit in a narrow segment.

Could Hero do this in the “Roadster” segment as well, by hoping for a “Halo” effect created by Hero Hawk, and reducing the adverse price gap between itself and Atlas and BSA? The client was unwilling to experiment with a price rise of its Roadster cycles to provide the answer, deeming it too risky, too soon.

HTA was now convinced that relevant and exciting products were stronger builders of brands than brand advertising alone, but should such products come from an advertising Agency or its clients?

Not content with waiting for Advertising pundits to debate the issue, HTA’s account team on Hero looked elsewhere for inspiration. It came soon in the form of a request from Hero to produce a brochure for Hero’s export arm. Brochures from leading international bands were given to the Agency and in those pages, it noted a strange type of cycle –beefier in appearance than not just the anorexic “pseudo racers” like Hero Hawk, but more so than even the Roadster trusted by India’s rural millions, this type, termed the “MTB” looked like no cycle ever seen before.

A scan of the environment revealed other signs:
• Despite the attraction of the Maruti Suzuki 800 cc car, the Mahindra jeep, for long the “U” in “SUV” well before that term became fashionable. was the preferred preferred automobile in rural India.
• Maruti’s recently launched Gypsy SUV was quickly gaining a cult following in urban India – as it enabled a lot of latent “Marlboro Man” types to come out of the closet. Further, adventure sports, until now the preserve of Occidentals, were gaining in popularity amongst DINK’s and DISK’s. Proof lay in the “house-full” signs of the white water rafting resorts along the Ganges in the lower Himalayas.
• While rural Indians, too, loved the Gypsy, the absence of a diesel engine option deterred them.
• While sales of Hero’s Majestic mopeds were flagging, its Hero-Honda motorcycles, offering unprecedented fuel efficiency, were booming in rural India. The HTA team discovered that India’s villagers preferred a 2nd hand scooter or motorcycle to a new moped, as the latter had become as much a symbol of poverty as their Roadster cycle.

Armed with these insights, HTA’s team on Hero drew up a concept of the “SUV” of bicycles – one that would offer the “S” ( for Sport) for urbanites, and the U (for Utility) for rural folk.
Thus was born the “Hero Ranger”, with a new term “ATB” (All Terrain Bike). So confident were HTA’s Hero team and the client, that it was launched without any consumer clinics, and just a press advertisement that simply showed a boy with it on a hilltop, with the headline” Now go where no cycle has been before”

The response? Advertising had to be suspended after the first couple of releases as every cycle dealer – rural or urban – ran out of stocks within a fortnight, and phones in Hero Cycles’ sales department rang off the hooks ! (Yes phones were still on hooks those days!)

The impact on consumers and competition was equally dramatic:
• With no comparable product, consumers happily paid a premium of 20% to dealers on top of an already high price of INR 1000.
• Although gears were offered ab-initio, the novelty of the bike rendered them a cosmetic accessory.
• When BSA finally responded 8 months later with its “Street Cat” ATB, backed by a multimedia campaign, the HTA team had already helped finalise the details of a Mk 2 version of Hero Ranger that offered a ladies version, two sizes, contemporary graphics, a more comfortable seat and twist-grip multi-speed gears. The in-shop impact justified the price of over INR 2000 – unheard of in those days!
• Hero Ranger faced a major production bottleneck, however. Its (largely contractual) labour force, paid historically on a per-piece basis, could assemble fewer Rangers than Roadsters per day. Assembling the same “Roadster” product for decades, their output per hour had increased consistently, while the cable-operated brakes and gears of the Hero Ranger made it difficult to assemble as fast, reducing their earnings rate. The higher margins of the Hero Ranger, however, were generously shared with workers by Hero’s management as an interim solution.
• Hero’s ultimate solution, however, came in the form of India’s first fully automated cycle assembly unit – Gujarat Cycles – in 1989-90. Although this was dedicated for exports, it showed the way for the cycle business in an India where even the poorest Indian would be fooded with choices from across the world.
• The most significant impact was, however, was that new product development – considered un necessary in an economy protected for decades – became an integral part of Hero Cycles’ business process. Two new products became were launched every year thereafter, making Hero cycles the benchmark brand in every segment of the Indian market, with far less pressure on its prices.

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Retrospect

With increasing urbanization has come a larger network of roads, and the so called “fancy” cycles are today the standards. With increasing affluence, a motorcycle – used or new – has

become the entry level vehicle for the majority of Indian adults. The Indian cycle market has declined in size, and brands such as Atlas are now defunct.

But a more educated and therefore more health and conscious Indian may soon look at cycling as a necessity once again – not for transportation, but for better quality of life.

For this to happen, environmentalists, town planners and the Govt. need to create new-age cities where clean public transport and cycling become the hub and spoke of Indian mobility.

But the most vital catalysts of all will be the businesses that own cycle brands – will they grow this tree, or remain content to manipulate its shadow?

Manoj Berry, Embrand’s founder, headed the JWT team that managed the various brands of the Hero group in India, from 1987 to 1993.