The Search for a Sweet-spot

It was a hot afternoon of Chennai when Mr. Rao, the Managing Director of Faulad Steel and
Cyrus Broacha, newly appointed head of the marketing practice of Mantra Consulting were
discussing the future prospects of the company. Mr. Raos ambition was that Faulad Steel
should have a strong pan-India presence and be known for its unmatched quality and
services. He believed, A strong positioning is the only way to earn a revenue premium in
such a competitive market.
Cyrus and his team had extensive discussions with the MD and decided to do an extensive
primary research to get an understanding of the history of the brand and its perception from
the point of view of the various stake holders.
The Company
The Faulad Steel group was promoted by a team of experts with proven track records. It
was established with a vision- To be recognized as a producer of top-class steel. The group
began its steel rolling in 2007-08 with a capacity of 100 metric tons (mt) per month.
The single-minded and consistent efforts of the promoters yielded results and by 2014, the
group had its own steel rolling capacity of over 1 lakh mt per annum. The focused marketing
strategies enabled Faulad Steel to enjoy a price premium for its branded products over other
non-branded products available in the market. The brand was highly respected for its quality
and range of products and the company strived to produce steel at international standards of
cost and quality. With a wide range of steel products (over 100), it was one of the fastest
growing national steel brands with market presence in over four southern states of India.
Faulad Steel chose to grow through a unique franchisee model aimed at developing a panIndia loyalty for the brand. The group had four units located across Tamil Nadu(2), Karnataka
(1), and Andhra Pradesh(1), producing steel of the highest quality. Faulad Steel provided a
unique value proposition with multiple benefits to all franchisees that were part of the rapidly
growing national brand.
The company invested heavily in marketing efforts and was one of the pioneers of
advertising in the Chennai steel industry. An efficient marketing team with the ability to think
ahead of time was its chief strength, thus helping turn challenges into opportunities.
Consistent efforts to create brand awareness of its products helped Faulad enjoy a broad
reach.
The Steel Industry
The Steel Industry was highly fragmented with the presence of national players like TISCO,
SAIL, Jindal, Vizag Steel etc. In Tamil Nadu itself, there were many local players
-Angalaman, Super Bright steels etc. with 2-3 players being added to the competition every
year. The steel supply chain comprised of the company plant, distributors, dealers/traders
and the end customer. Faulad Steel had four distributors and around 200 dealers in Tamil
Nadu. Steel products were generally categorized into flat steel and structured steel. Faulads
Product portfolio included Thermo Mechanically Treated (TMT) steel, flat steel, angles, rolls,

pipes etc. Major brands were present in multiple categories. Dealers could order goods from
a distributor or directly from the company. Once ordered, goods took around 1-3 days to get
delivered depending upon the distance from the plant to the distributor.
Research showed that the market classified steel brands into two tiers. All national brands
including TISCO, SAIL, Jindal, Vizag fell into Tier I. Brands like Angalaman, Super Bright
steels, JK Steels were in Tier II. Faulad was arguably perceived to be between Tier I and Tier
II. In the market, excluding some national brands, products from all other brands were
considered to be commodity products. Faulad Steel was one of the local brands which
invested a lot on advertising and which had the capability to deliver to any part of Tamil Nadu
within 4-6 hours thanks to its strategically located plants (in the centre of Tamil Nadu).
Marketing Efforts
Faulad TMT was launched in 2014. Since then, the company had undertaken many
marketing initiatives right from advertising on the radio, newspapers, TV channels etc. to
sponsoring cricket matches and Indian festivals like Pongal. The details of all the
communication media explored by them are given in the Table A

Communication
Media
Radio
TV
Newspaper
Dealer Boards
Information Boards
Hoardings
Auto-rickshaw
International
Cricket Matches
Festivals

Books and Online

Publicity
Promotional
Material
Mason Meets

Loyalty Programmes

Table A
Details of the Current Marketing Efforts
Details
102.3, 101.1
News channels, Local TV (Sun News, Jaya TV, CNBC TV18)
Local daily newspapers in Tamil Nadu, Deccan Chronicle
Flex in-front of dealer shops
These are the boards at the dealers shop which mention why that
dealers prefers to use Faulad TMT
Dealers name printed on hoarding along with Faulad Steel
5,000 autos in Chennai for 2-3 months were hired for this purpose.
For this auto-drivers are given few gifts.
Sponsored cricket matches at Chepauk stadium in Chennai
Sponsored few games on the behalf of dealers (during Pongal)
where Faulad is likely to get more mileage
Advertisements in Yellow pages, builders directory
Material distributed to dealers which includes Brochure, Leaflets,
Cap, Rough pads, Pens, Calendars, Chalan books, Key chains,
Annual diary, stationary material
Organize mason meets in dealer areas to promote ISI brands,
Distribute lunch-boxes, Kits containing measure tapes, rough pads
etc.

To promote sales especially during slack periods, Faulad implemented some loyalty
programmes. In these programmes, domestic and foreign trips were offered depending on
the dealer sales in the last three months. Celebrities were invited on these trips and
certificates of appreciation were offered to dealers. Different threshold levels were decided
upfront to encourage the dealers to sell more of Faulad steel.
Table B
Trips offered vis--vis sales
Sales (in tons)

Trip destination

50
100
150
200
400

Goa
Sri Lanka
Malaysia
Singapore
Bangkok

Apart from these activities, the Faulad marketing team also carried out activities to
supplement their dealers businesses. They conveyed daily steel rates to dealers and gave
them future estimates of prices so that dealers could take informed decisions (For example:
if the next days prices were expected to increase, they informed the dealers to order goods
on that day itself.) The team gave market knowledge to dealers from time-to-time, planned
annual trips, pushed dealers to achieve targets and also provided technical support
especially during complaints regarding quality.

The Primary Research

As a part of the primary research, the team visited distributors, dealers, and traders from
urban areas including Chennai, Dindugal, Kanchipuram etc. Generally dealers get exclusivity
to operate in a particular area, though the team came across some areas in which multiple
dealers were present in the same area. Through dealer interviews, the students tried to find
out different aspects about the industry, how it had changed over the years, what factors
customers looked for while buying the product, and what was the perception of different
brands in the market. The team also tried to understand the effect of advertisements on the
customer, what made a dealer stick to one particular brand, etc.
Insights from Primary Research
In urban areas, the main customers were contractors and builders. This being the open
market, customers were aware of the strengths and weaknesses of different brands and
hence generally asked for a specific brand. Thus, dealers/traders had less say in selling a
particular brand. The things that mattered to the customer included brand image, national
presence, and advertisement/awareness.
The team also noticed that steel prices varied every day as it depended on a lot of factors
like raw material prices, coal prices, demand in the market, etc. Credit period was generally

4-6 days. Steel prices and credit period varied from dealer-to-dealer and depended on the
past record of the dealer.
Dealers tried to maintain their loyalty towards few brands. It was very rarely that they
switched over to other brands and some main reasons of doing so were irregularities in
supply, shorter credit period, improper handling of customer relations, quality issues (in rare
cases). Instances of complaints regarding quality were generally rare because all such
issues were addressed on priority by almost all brands and goods were replaced if required.
The Future
From the time Faulad brand was launched in the market in 2014, Mr. Rao and his team had
made every possible effort that they could think of to gain control of the market. They had a
substantial customer base in this one year. But still Faulad steel lagged in mind recall. Mr.
Rao was thinking of how to change the perception of the brand and increase the brand
value, especially in the market where all the products were perceived to be commodity
products.
Based on the insights gathered through extensive primary research, Cyrus and team need to
advice what levers that Faulad would needs to pull to increase the market share and the
cost-effective and innovative ways that Faulad could adopt to increase the brand equity
which in turn would enable the company to charge its brand premium and establish itself as
a top-class steel producer.

1. What other marketing strategies you think Mr. Rao can implement to
manufacture top-class steel and thus create a pan-India presence?
2. What are the aspects which the consultant should evaluate in the existing
business model. Evaluate aspects like franchisee model, pull vs push
advertising strategy etc.?
3. Develop a short-term and long term marketing strategy for Faulad Steel?