CP Report - Group 2 - Cummins

TO DETERMINE THE FEASIBILITY FOR CUMMINS TO ENTER
THE DIESEL GENERATOR RESELLER MARKET
A PROJECT REPORT
Submitted by
Ramneesh Singla (139278083)

Anuj Shah (139278023)
Chinmay Kothekar (139278044)
Kaustubh Kirti (139278054)
Under Guidance of
Prof. Arti Kalro
for the coursework in
Collaborative Practicum
Shailesh J. Mehta School of Management

Indian Institute of Technology Bombay
April 2015
Acknowledgement
We would like to take this opportunity to express our profound gratitude to Prof. Arti Kalro,
our guide for providing us with such an opportunity and mentoring us throughout the project. During
critical times when we couldnt progress further, she guided us towards the possible solutions. We
would also like to thank Prof. Dinesh Sharma for his valuable insights during our presentation in the
previous semester.
We are also grateful to Mr. Chirag Puri, Mr. Sachin Kondejkar, Mr. Ritesh Joshi, Mr. Hemanth
Sameer Ponnada and Mr. Amol Bakshi; our guides, sponsors and coordinators from Cummins India
Limited. We are greatly thankful to them for providing their valuable guidance at all stages of the
project, their advice, constructive suggestions, positive and supportive attitude and continuous
encouragement, without which it would not have been possible to complete the project.
We would also like to thank all the dealers, agents, OEM owners, service agents, Mahindra
First Choice owner, Chairman of Gujarat Generators and customers for their valuable insights that
helped us shape the structure of the entire project.
We also thank Cummins India Limited, for giving us this wonderful opportunity to learn which
has helped us gain practical experience in the fields of market research and energy sector. At the same
time, we thank our institute, Shailesh J Mehta School of Management, IIT Bombay for giving us this
opportunity to work with them and gain experience beyond academics.
2
Shailesh J. Mehta School of Management, IIT Bombay
Executive Summary
Cummins is an important player in the diesel generator market and is a market leader in high KVA
segment. However, in the low KVA segmented it faces very stiff competition from Kirloskar which is
the market leader in that particular segment. One of the biggest issues the company faces today is to
expand its customer base in the lower KVA segment and enhance its connect with the customers.
Cummins currently faces disconnect with the customers due to two reasons. Cummins provides
warranties which are time bound. After the warranty period gets over the relationship with the
customer breaks and Cummins has no idea how to plan retention of those customers. Secondly, many
of the customers buy second hand diesel generators through the un-organized channels which is a
booking segment. If we look at the online presence of the second hand market, the scope of growth
is immense. Products available on websites like Olx and Quickr are from across geographies, industry
segments and KVA ratings. In order to address both these major concerns we have tried to study and
analyze the current existing second hand market and tried to comment of the scope of an organized
player like Cummins to enter the business.
Cummins Business Objectives - As discussed, the second hand market of the diesel generator sets is
booming. Therefore, it will be a great opportunity to tap into the second hand customer base and
build connect with the customers who go for second hand diesel generator sets after their warranty
lapses. Expanding into the second hand market will also help Cummins to attract new customers and
increase brand recognition and market share in the lower values segments of the diesel generators.
Through an organized second hand model Cummins will develop a much better connect with the
dealers because any such model would be driven through them.
Project Objectives - In order to establish connect with the customers and dealers of Cummins, we have
tried to understand the second hand diesel generator market and how is it currently functioning in
the country. We have tried to individually identify all the market participants and what is their role
and incentive structure to contribute to the business model. We have tried to build a profile of the
buyers and sellers in the market. We have tried to identify facilitators like agents (people who help
buyers to meet sellers) who support the model. We have tried to look from the perspective of the
customers as to what were the key parameters they looked at before buying a second hand diesel
generator sets. We have tried to identify all the value chain activities in the entire system and estimate
the margins involved for each participant. Accordingly, we have tried to deduce the pricing structure.
Apart from the second hand diesel generator models, we have also tried to benchmark and gather
information about other existing models like the Mahindra First Choice and CAT Rental Stores which
work on similar principles. After analyzing these business models we have tried to propose a business
model which is feasible for Cummins to adopt. We have tried to develop a model keeping in mind all
the market participants and their key roles and responsibilities. Further through our research, we have
tried to validate the entire model through our interaction with each of the market participants. This
research will Cummins understand the current business model operating the second hand space and
accordingly build up a strategy. This report will help Cummins to tap into this unorganized market and
try to organize it into a fully functional organized marketplace.
Table of Contents
Acknowledgement .................................................................................................................................. 2
Executive Summary................................................................................................................................. 3
Abstract ................................................................................................................................................... 7
Motivation............................................................................................................................................... 8
Research Methodology ........................................................................................................................... 9
Project Timeline .................................................................................................................................... 10
Key Findings .......................................................................................................................................... 11
1. Overview ....................................................................................................................................... 12
1.1 Industry Overview ....................................................................................................................... 12
1.1.1 About Diesel Genset ............................................................................................................ 12
1.1.2 Genset Specifications ........................................................................................................... 12
1.2 Market Overview ........................................................................................................................ 13
1.2.1 Market Drivers ..................................................................................................................... 13
1.2.2 Market Segmentation .......................................................................................................... 14
1.3 Cummins Overview ..................................................................................................................... 15
1.3.1 About Cummins.................................................................................................................... 15
1.3.2 Business Segments ............................................................................................................... 15
1.3.3 Cummins Diesel Sales & Service India Ltd. .......................................................................... 15
1.4 Cummins Power Generation Business Unit ............................................................................. 16
1.4.1 Recon Gensets...................................................................................................................... 17
1.4.2 Competitive Profile .............................................................................................................. 17
1.4.3 Cummins and OEMs ............................................................................................................. 18
1.4.4 Market Seasonality .............................................................................................................. 19
1.4.5 Production............................................................................................................................ 19
1.4.6 Pricing................................................................................................................................... 19
1.4.7 Product Segmentation ......................................................................................................... 20
1.4.8 Cummins Diesel Generator Market .................................................................................... 20
1.4.9 Cummins and Second Hand Diesel Generator Market ........................................................ 21
2. Best Practices from Existing Models ............................................................................................. 22
2.1 Objective ..................................................................................................................................... 22
2.2 Methodology............................................................................................................................... 22
2.3 Mahindra First Choice ................................................................................................................. 22
2.3.1 Business Model .................................................................................................................... 23
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2.3.2 Key Participants.................................................................................................................... 23
2.3.3 Inventory Management ....................................................................................................... 24
2.3.4 Maintenance and Value Added Services.............................................................................. 24
2.3.5 Pricing................................................................................................................................... 25
2.3.6 Buy-Back Model ................................................................................................................... 25
2.3.7 Financial Regulations ........................................................................................................... 25
2.3.8 Sales Techniques .................................................................................................................. 25
2.4 Gujarat Generators ..................................................................................................................... 26
2.4.1 Business Model .................................................................................................................... 26
2.4.2 Participants .......................................................................................................................... 26
2.4.3 Machine Procurement ......................................................................................................... 27
2.4.4 Customer Decision ............................................................................................................... 28
2.4.5 Pricing................................................................................................................................... 28
2.4.6 Servicing Entity ..................................................................................................................... 28
2.4.7 Marketing & Sales ................................................................................................................ 29
3. Insights from Online OLX Listings of 2nd Hand DG Sets ................................................................. 30
3.1 Objective ..................................................................................................................................... 30
3.2 Methodology............................................................................................................................... 30
3.3 Overall Market ............................................................................................................................ 30
3.4 2nd Hand Product Segment Mix - Cummins ................................................................................ 30
3.5 Product Segment Mix 2nd Hand Market ................................................................................... 31
3.6 Geographical Analysis ................................................................................................................. 32
3.7 Pricing Analysis............................................................................................................................ 32
4. Findings from Key Stakeholder Interviews ................................................................................... 34
4.1 Findings from Dealer Interviews ................................................................................................. 34
4.1.1 Objective .............................................................................................................................. 34
4.1.2 Business Models................................................................................................................... 34
4.1.3 Operating Channels.............................................................................................................. 36
4.1.4 Demand ................................................................................................................................ 37
4.1.5 Margins ................................................................................................................................ 38
4.1.6 Online Presence ................................................................................................................... 38
4.1.7 Customer Base and Customer Types ................................................................................... 38
4.1.8 Scope of an organized player ............................................................................................... 39
4.2 Findings from Agent Interviews .................................................................................................. 40
4.2.1 Objective .............................................................................................................................. 40
4.2.2 Background .......................................................................................................................... 41
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4.2.3 Agents Business Model ........................................................................................................ 41
4.2.4 Key Responsibilities.............................................................................................................. 41
4.3 Findings from OEM Interviews.................................................................................................... 42
4.3.1 Objective .............................................................................................................................. 42
4.3.2 Market & Business ............................................................................................................... 42
4.4 Findings from Customer Interviews ............................................................................................ 43
4.4.1 Objective .............................................................................................................................. 44
4.4.2 Findings ................................................................................................................................ 44
4.4.2.1 Generator Maintenance and Rental Business ............................................................. 44
4.4.2.2 Construction Contractors............................................................................................. 45
4.4.2.3 Decorators and Party Halls .......................................................................................... 46
4.4.2.4 Hospitals and Medicals ................................................................................................ 46
4.4.2.5 SMEs............................................................................................................................. 47
4.4.2.6 IT/Corporate Offices .................................................................................................... 47
4.5 Insights from CRM Data .............................................................................................................. 48
5. Proposed Business Models ............................................................................................................... 49
5.1 Model Analysis ............................................................................................................................ 50
5.2 Single Brand Model ..................................................................................................................... 50
5.3 Multi Brand Franchisee Model ................................................................................................... 54
Learnings from the Project ................................................................................................................... 59
Limitations ............................................................................................................................................ 60
Appendix ............................................................................................................................................... 61
1. Table 1: CRM Data from Cummins ................................................................................................ 61
2. Table 2: OLX Data .......................................................................................................................... 64
3. Table 3 Summary of Dealer Interviews ...................................................................................... 69
4. Dealer Interview Guide ................................................................................................................. 73
5. Customers Interview Guide .......................................................................................................... 74
6. Table 4 Summary of Customer Responses................................................................................. 75
Web References .................................................................................................................................... 78
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Abstract
Cummins Power Generation India is the leading manufacturer and market leader of diesel fuel power
systems. It is a single window provider of complete power solutions offering top-of-the-line products
and services. Cummins has achieved position of market leader in the high value segments where the
KVA ratings of the diesel generator is higher. This segment largely caters to industrial buyers and large
institutions. However, in lower value segments, market is dominated by Kirloskar and Mahindra
Powerol.
According to the major players in the industry, there is an existing market for Second Hand Diesel
Generators currently dominated by unorganised sector. This market appears to be more significant
for lower value generators where churn is much higher. As of now, no large player has been able to
tap the market of second hand diesel generators.
Through this project, Cummins wants to find out the feasibility of entering into second hand diesel
generator market in India. Company wants to determine the market size, functionality, value
proposition and market entry strategy for DG reseller market.
This project brief contains the research methodology & research design (with timelines) our team has
undertaken to understand the existing second hand DG market and other reseller models and hence,
assess the possibilities for Cummins to enter into this market.
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Motivation
Power is one of the most important input factor for growth of any business or economy. In a country
like India, where many areas have intermittent power supply and load shedding, there is a huge
requirement of power generators for the survival of the businesses. However, in the weakening
economic scenario, not all businesses have the financial ability to purchase a power generator,
specifically, a DG set. Hence, a rise in 2nd hand DG set market was observed which ate into the
businesses of the DG set manufacturers.
Also, due to newer energy efficiency and environment norms (CPCB II norms), there is a need to
manufacture energy efficient generators which will lead to price hike. So, when first hand DG sets
become expensive, the market for 2nd hand DG set prospers. And, with the turn of economy and
increasing focus on manufacturing and infrastructure development, the demand is bound to increase
further and hence this market cannot be ignored.
Cummins had observed the development of this 2nd hand DG set market and wanted to understand if
it would be feasible for them to enter the highly unorganized 2nd DG set market and whether it would
help them capture more market share. They had internally tried to work on this opportunity but had
to leave it due to time and resource constraints.
When presented with this exciting project, we were elated to get an opportunity to work on a live
important business problem faced by Cummins wherein we would be assessing a business opportunity
for Cummins and proposing an operating model for the same. If executed successfully, our project
would open up a whole new business avenue for Cummins and would bring a significant change in the
industry. Moreover, it would be a great learning experience for us understanding B2B market
functioning, study of 2nd hand business models and evaluation of new business opportunity and
practical application of business research methodology.
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Research Methodology
1. Exploratory Research
1.1. Secondary Data Research: Research through reports, journals, magazine and brochures to
get a better understanding of market
1.2. CRM Data: To understand the existing customer profile of Cummins
1.3. Face to Face Interviews with Dealers
2. Descriptive Research
2.1. Detailed interviews with dealers, customers, agents and other stakeholders
2.2. Discussions with Sales and Distribution teams at Cummins and its OEMs (Powerica)
2.3. Interviews with management of Mahindra First Choice and Gujarat Generators to accomplish
best practices for second hand market in India
2.4. Quikr Data: To profile the existing second hand DG market on the basis of KVA ratings,
geography and pricing
2.5. Data would be collected in the required format from all the available channels
2.6. Post data collection, it would be analysed for insights and key findings would be presented
to the company
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Project Timeline
Key Findings
1. Market
1.1. The 2nd hand DG set market is highly fragmented and unorganized with no manufacturer
present in this market.
1.2. There exists a strong market for 2nd hand DG sets which is growing rapidly in the past few
years especially due to weakening of economy and implementation of CPCB II norms which
has adversely affected price sensitive customers. These 2nd hand DG sets are typically 40%
cheaper than the original DG set. Majority of the market share is occupied by low KVA rated
DG sets.
1.3. The major channels used for selling 2nd hand DG sets are through dealers via agents, online
classifieds and existing customer relationships of dealers.
2. Market Participants
2.1. The 2nd hand DG set market has the following primary participants the dealer (who
procures, stores (optional) and sells the DG set), the agent (generates leads for both
procurement and sales and acts as a market maker), seller (sells used DG set) and customer
(buyer of used DG set).
2.2. The dealers procure machines through buy-back model or via agents. They usually dont
maintain inventory due to space and budgetary constraints. They serve pan-India customers
primarily through their strong agent network. They prefer selling mullti-brand DG sets to
serve diverse needs of customers.
2.3. Agents are typically persons (primarily freelancers) with strong contacts who have industry
experience by having worked somewhere in the entire value chain. They facilitate the
transaction by finding a seller/buyer for a customer. They work on a commission basis by
charging 2-5% of the final sale value as their commission.
2.4. The customers of 2nd hand DG sets are price sensitive buyers typically belonging to SMEs,
DG rental service providers who would be using them for non-critical purposes. The major
decision parameters for them are price, brand (are brand agnostic, just wanting branded
DG set) and working condition.
3. Pricing
3.1. Pricing of 2nd hand DG set is majorly based on brand, working condition and running hours.
3.2. The margins that can be charged by the dealer is theoretically unlimited but is typically 10%
or upwards.
4. Scope for Organized Player

4.1. The market participants were in favour of an organized player like Cummins entering the 2nd
hand DG set market as it would help improve trust amongst buyers.
4.2. The customers were even ready to pay a premium of upto 15% for purchasing genset from
organized player.
4.3. The dealers proposed that this player should go for multi-brand approach to serve diverse
needs of customers.
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1. Overview
1.1 Industry Overview
The Diesel Genset (DG) industry in India is highly competitive and principally unorganized with
exception of a few medium and large sized companies in the organized category.
1.1.1 About Diesel Genset

A diesel generating set as a system consists of the following components or blocks:
a. The diesel engine and accessories - cost accounts for ~75% of the genset value
b. AC Generator
c. Control systems and switchgear
d. Foundation and power house civil works
e. Connected load with its own components like heating, motor drives, lighting etc.
Diesel Genset Parts
Image Source: http://www.beeindia.in/energy_managers_auditors/documents/guide_books/3Ch9.pdf
1.1.2 Genset Specifications

While selecting a genset the following parameters are primarily looked into:
Application standby or prime power

Generator types and features Phase (Single/Three), Voltage (High/Low)
Engine operation speed
Fuel tank capacity determines usage hours
Dimensions space and weight
Special Features Circuit breakers, Self-start, DC Output
Price
Service and Maintenancex
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1.2 Market Overview
In 2013, the diesel generator market In India grew at 9.5%1. It is estimated to grow at a CAGR of 12.4%2
over FY 2013-18. The estimated size of the market is Rs. 6000 crore3.
Some of the key players in this industry are:
Kirloskar Oil Engines, Cummins India, Mahindra Powerol, Caterpillar India, Birla Power Solutions,
Ashok Leyland power solutions, Greaves cotton and Kohler power systems to name a few.
Company-wise presence in DG set market by rating:
1
India Diesel Genset Market Outlook 2018, RNCOS
2
Diesel Gensets Market in India 2014-2018
3
Business India Corporate Report, September 2013
1.2.1 Market Drivers

Now, looking at some of the factors that is expected to drive this market:
Long term Investment in infrastructure as per 12th Five Year Plan
Opportunities Power deficit of 4.2% in India

and Drivers CPCB II norms to demand greater technological capabilities
Increasing demand from international markets
Unreliable utility power & unstable grid supply
High portion of grid backed up with gensets
Some of the threats are as follows:
Low market liquidity to delay projects

Margin pressures due to increasing commodity cost and high inflation
Threats Weakening demand due to price rise led by CPCB II norms

Shift towards renewable power sources
Competition from International players entering Indian market
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1.2.2 Market Segmentation
The market can broadly divided into 4 product segments1:
Small diesel generators (15 - 75 kVA)

Medium diesel generators (75 375.1 kVA)
Heavy Duty diesel generators (375.1 kVA 750 kVA)
Large diesel generators (750 kVA onwards)
While the small engine market is more fragmented with many competitors, the medium and large
segments see limited competition from a few MNCs and large Indian companies. The Indian diesel
generator market has been largely occupied by 20 to 62.5 KVA, accounting for nearly half of the total
diesel generator market2.
This market also can be classified into 4 segments on the basis of customers:
Industrial (Manufacturing)
Commercial (Offices and other units)
Infrastructure (Construction of tunnels, bridges, roads etc.)
Residential (Individual buyers)

1
Indian Diesel Generator Set Market, Frost & Sullivan
2
India Diesel Genset Market Outlook 2018, RNCOS
The first 3 customer segments are institutional buyers who buy in bulk for commercial use whereas
individual buyers buy it majorly for personal use or small scale businesses. Diesel gensets are observed
to be popular among rural/industrial consumers. A preference for petrol/kerosene based portable
gensets and inverters is observed urban consumers.
Within industrial customers, there are 2 distinct categories in the generating sets buyers:
Units that rely on power produced by sets for part/full operations

Stand-by arrangement - generating sets used only during a disruption in power supply from
grid
Diesel engine power plants are most commonly used in low power systems (captive non-utility). The
primary reason for their widespread use is the higher efficiency of the diesel engines in comparison to
gas turbines and small steam turbines in the considered output range. In those applications where low
captive power is required, the ideal power generation method is to install diesel generator plants.
The industrial advantage of using diesel gensets in comparison with other mentioned power sources
are as follows:
Low installation cost
Shorter delivery periods

More efficient and comparatively lower space requirements
Minimal cooling water requirements
Short start-up time, Ease of use, More reliable and dependable source of power generation
Suitable for poorer grades of diesel
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1.3 Cummins Overview
1.3.1 About Cummins
Cummins India Limited (CIL) is a 51 percent subsidiary of Cummins Inc. USA, the worlds largest
independent diesel engine designer and manufacturer above 200 HP. Cummins Inc, the majority
shareholder is the leading worldwide designer and manufacturer of diesel engines from 16HP to 3,500
HP. Cummins, pioneer and market leader in design development and manufacturer of diesel engines
is the leading power solutions provider to the Indian industry. CIL was set up in 1962 as Kirloskar
Cummins Limited and became Cummins India Limited (CIL) in 1997, when Cummins increased its stake.
Today, CIL is Indias largest manufacturer of diesel engines with a range from 15kVA to 2000kVA and
value packages serving the Power Generation, Industrial and Automotive Markets.
Cummins Diesel Sales & Service (India) Ltd. (CDS&S) and Cummins Auto Services Ltd. (CASL) are 100%
subsidiaries of Cummins India Limited. CILs products include diesel engines in the range of 60 HP to
2,700HP. It manufacturers over 10,000 engines per annum and is among Indias largest exporters of
engineering products. CIL offers complete range of Cummins Worldwide products. Where indigenous
production is not available, Cummins assists in the imports of a product from one of the Cummins
Group Companies.
1.3.2 Business Segments

CILs customers in the Power Generation solutions sector include businesses in all segments since the
range produced by CIL offers power back-up for industrial and business units of all sizes. Important
sectors for power generation solutions are call centres, realty, hospitality, textiles, auto, ancillaries
and IT. In order to ensure customer focus, the Power Generation division is divided into two business
units Low Horse Power Business Unit and the High Horse Power Business Division. The High Horse
Power Business Unit has three sub-divisions: Cummins Power Projects, Cummins Power House
Consulting, and Cummins Power Rent.
The Cummins Industrial Business Unit markets diesel & gas engines in the range of 65 to 2,700HP.
These engines are available on a variety of mobile and stationary equipment used in various sectors
like Construction, Mining, Compressor, fire & Industrial pumps, Rail, Marine, Oilfield and Defence.
Engines are customized to the demands of the application and are offered with cooling, exhaust and
air intake systems fully integrated with equipment design for optimum performance
The Automotive Sector focuses on owners and operators of Trucks and other heavy-duty vehicles. It
is primarily engaged in distribution of parts & components, service support and value added services
for bumper to bumper support. Cummins India Limiteds Low Horse Power Business Unit, which
manufactures and markets small horsepower engines in the range 15kVA to 125kVA, is partially
engaged in the manufacture of Telcos CNG engines (Cummins QSV gas engines) currently used to
power Delhis public transport system. The Cummins QSV gas engine has been designed to combine
compact size, low emission levels and excellent performance characteristics of high-speed technology
with the medium speed benefits for lowest lifecycle.
1.3.3 Cummins Diesel Sales & Service India Ltd.

CDS&S provides after-market support for stationary power and off-highway applications. CDS&S
mainly provides spare-parts, service contracts, re-powering & reconditioning services for engines and
generating set equipment. It is among Indias largest service support networks with over 91
dealerships in 211 locations and employs 550 people to support its operations.
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1.4 Cummins Power Generation Business Unit
Looking at the Diesel Gensets, Cummins is one of the leading players in the global as well as Indian
market with 33% market share globally.
Cummins India Limited is into manufacturing of diesel and natural gas engines. The company
operates in major 4 business sectors: Industrial, Automotive, Power Generation and Distribution.
The Power Generation segment includes diesel generator sets, natural gas generator sets, and
producer and biogas generator sets equipment.
Cummins India Limited is present across the entire range of power gensets ranging from 7.5kVA
to 3,000kVA which allows it a large customer base.
On the back of its global expertise, superior technology and ability to customise products locally,
Cummins is a leader in the medium horse power (MHP) (375-750 KVA) and high horse power
(HHP) (750-2000 KVA) segments with 53.4% and 54.1% market share, respectively1.
In addition to the product quality and brand acceptance, the strength lies in the after sales service
and warranty practices. Cummins provides single point contact for every client query, unlike its
peers and hence finds a lot of acceptance with institutional customers.
1
CRISIL Report 2011
Cummins India Limited is relatively weak in the low KVA business segment that faces intense
competition and is dominated by unorganised players and Chinese firms, and also sees its market
share threatened by gensets alternatives such as UPS, inverters, etc. The major competition Cummins
faces in the low KVA business segment is from Kirloskar Oil Engines, who is the market leader in the
low KVA segment while Cummins is the market leader in the high KVA segment.
Cummins Product Mix:
<200KVA 10%
200-300KVA - 15%
400-450 KVA 10%
>450 KVA 40-45%
The product range of Kirloskar Oil Engines, Greaves Cotton and Caterpillar matches that of
Cummins; they compete in the entire KVA range of the genset market.
In the LHP segment, Kirloskar is the dominant player (~43% market share) where its advantage is
distribution. Also, Kirloskars service requirements and spares prices are lower than Cummins
LHP market is extremely price conscious and hence players like Ashok Leyland and Eicher amongst
others have gained some market share by offering lower prices.
In the HHP segment, Cummins competes with Caterpillar which has a good product but is
expensive and has a limited service network.
Cummins India is focusing on increasing market share and volumes in the LHP segment (840 KVA),
defend share in the mid to high KVA range and enter new geographies and markets like Oil and
Gas, Defence.
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1.4.1 Recon Gensets
Recon Gensets are one of the type of products in Cummins. If we think from Cummins perspective,
Recon gensets are second hand DG gensets which are reconfigured in the Cummins workshop. Now,
reconfigured means that the major parts of the DG are replaced with new parts and the parts which
are less rugged are kept the same. The cost to reconfigure a DG is very high and the supply chain of
the recon DG is also very complex, and hence, Cummins is not very much in recon DGs in India.
For Recon DGs, first the Cummins engineers go to the site to inspect the DG to see if it has to be
reconfigured or not. Then, through the reverse supply chain, the DG is transported to the Cummins
workshop at Phaltan where it is reconfigured and remanufactured. After this step, then it is sold at a
higher price than a second hand DG would be sold in the market.
So, the moving parts of the machine which get worn out easily are removed and replaced. Along with
this, an additional warranty of 1 year is provided. Recon currently is done on the bigger gensets, mostly
of the cost of INR 15 lakhs or more as it makes more economic sense according to Cummins. Generally,
the capacity and the KVA rating of such gensets is 14 litres/320 KVA.
As the reseller market has 90 % of the demand from cities, the gensets for recon generally come from
urban areas. For buyers, according to Cummins, Capital Gains Tax is a major factor affecting the
purchase decision for second hand and recon DG sets.
1.4.2 Competitive Profile

Profiles of major competitors is provided in the table below.
Company Rating Range Dealer Network Service

Mahindra and 5 kVA 500 kVA 10,000+ selling points 160+ service points
Mahindra Ltd. Customized service and
maintenance contracts
KOEL 5 kVA 5200 kVA 400+ Sales Dealers

Perkins 5 kVA 2500 kVA 2 OEMs GMMCO 1-year warranties for
Power and Powerparts constant-speed engines and
Pvt. Ltd. 2-year warranties for variable
speed models
Extended contracts available
Ashok Leyland 10 kVA 2250 kVA 90+ dealers Warranty is for 30 months from
the date of invoice from the
factory or 24 months from the
date of commissioning or 5000
hours of operation, whichever
occurs first
Greaves Power 25 kVA 500 kVA 1200+ dealers N.A.
CAT 7.5 kVA 17550 kVA N.A. Through dealer network
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1.4.3 Cummins and OEMs
Cummins sells gensets mostly through its dedicated OEMs such as Jaksons, Sudhir Gensets and
Powerica. These are the channel partners of Cummins and it drives majority of its sales from these
partners. OEMs manufacture and install diesel gensets and provide the after sales services.
OEMs have their own distributor network through which they expand their range of operations
and business pan India.
The figure below shows the tasks performed by OEMs:
Role of OEMs
Cummins has a very long term relationship with these three OEMs: Jakson, Powerica and Sudhir as
discussed.
Jakson Powerica Sudhir

Established 1947 1980 1973
Current Size Rs. 1200 crores Rs. 1300 crores Rs. 1100 crores
Key Points 4 manufacturing facilities
1200 work force and it 8 state of art
with combines 6 lac sq executes 1500 MW manufacturing plants
feet manufacturing space production every year
Manufacturing Daman, Kalsar & Jammu Khanvel- Silvassa, Jammu, Silvassa,
Facility Bangalore DTA, EOU Bangalore, Masat,
and Chennai SEZ Gurgaon
Area of Operations North & North East India Maharastra, Goa, North & North West
Karnataka, South India India
Sales Office Delhi, Noida, Kolkata, Pune, Aurangabad, Delhi, Haryana,
Kanpur, Indore, Nagpur, Goa, Punjab, Gujarat, J&K,
Allahabad, Guwahati etc Bangalore, Madurai, Himachal Pradesh etc
Hyderabad etc
18
The current relationship with the OEMs was very important to Cummins because of the following
reasons:
The OEMs directly interacted to the Customer and carried out the last mile activity like
installation
Entire network across India was controlled by these three OEMs
The Relationship with the OEMs was very old and Cummins has helped them build their
business
The current size of the OEMs was very huge (~ Rs. 1000 crores) due to which they had a higher
bargaining power
Cummins holds a very symbiotic relationship with its OEMs.
Therefore, any further change in the working model would have to integrate with all the three OEMs
which are geographically distributed across the country.
1.4.4 Market Seasonality

Demand for the product is highly seasonal in nature. During peak months, products are ramped up
two months before the actual date to meet the high demand. March is a time in the year for high
demand.
Low KVA market is more customer driven (e.g. demand spikes during summers in north) and for high
KVA, fluctuations in specific industry (or economic cycle specific) drive the demand. However, the
most important differentiating factor is geography which determines the usage/ requirement of the
DG Set. As per the market seasonality trends, it is evident scope of sale of second hand diesel
generators will match the state of market.
1.4.5 Production
Production is mainly carried out Made-To-Stock, however there is a huge scope of customised
products in the High KVA segments. Under such circumstances the production is done on the basis of
Made-To-Order.
1.4.6 Pricing
The inputs that we got based on the pricing at the OEMs end were as follows:
Pricing is competition and geographically determined (10-12% higher in North India)
List price is initially quoted to the customer, post which negotiation happens and final price is
decided upon. This price can be as low as 15-20% below the list price.
19
Usage - Hours/ year
South
West
East
North
0 200 400 600 800 1000
Hours/ year
Region-wise Usage
Pricing is done by OEMs based on their margins. Cummins doesnt interfere with the pricing
unless it affects their market share
After sales service forms a small part of TCO. Diesel accounts nearly 80% of operating costs
Need to evaluate the importance of pricing on sales
1.4.7 Product Segmentation

Currently, the product segmentation can be done based on the usage like high KVA (7 X 15000 KVA
used at Mumbai Airport) or low KVA products like ones used in drilling machines. The segmentation
can be segregated into Low, Medium and High KVA. However the ideal segmentation that is followed
is on the following lines:
1) Primary Products Most important of all the segments, the usage in this segment is very high,
usage is more than 500 hours a year.
2) Standby Segments (critical applications) Usage is less than 500 hours per year
3) Very Critical segment - power is very critical like hospital or data centres.
Geographically, the products can be segmented as follows:
West (140 hours per year)

North (500 hours per year)
East (300 hours per year)
South (800 hours per year)
Note: The figures in brackets denote the average usage of DG power in each of these regions.
In South India, the usage is comparatively high due to its isolation from the northern grids.
1.4.8 Cummins Diesel Generator Market
It is pretty evident from the table below, the growth and presence of Cummins in individual market
segment. Cummins currently holds a very meagre market in the lower KVA segment. As discussed the
scope of growth is huge in the lower segment due to numbers. Even when we consider the scope of
selling second hand DG sets the scope is huge in the lower market segment. Cummins however has
no idea regarding the current market trends of how the low KVA rating segment is functioning.
20
KVA Rating Growth Rate Market Size Market Share Revenue Volume
(Units Sold) (individual Share Percentage
category)
1750-3000 -5.9% 189 41% 25% 35%
1250-1650 -18.3% 392 70%
850-1000 -11.2% 445 59% 25%
600-850 0.9% 1033 83%
320-500 -1.9% 3742 66% 25%
180-250 -6.5% 4139 66%
125-160 4.7% 10412 49% 25%
82.5-100 -0.64% 6614 31%
35-62.5 -16.7% 200319 28% 65%
20-30 -10.7% 30374 7%
15 -6.3% 24013 7%
1.4.9 Cummins and Second Hand Diesel Generator Market

Reconfigured Generators are a part of the market which Cummins is planning to currently tap in. These
include re configured or re manufactured products with a 1 year additional warranty provided. Ideally
the entire lifecycle of a genset is upto 15 years.
However, the capital expenditure in buying a genset is very huge due to which there is a huge scope
of getting in the second hand genset market. Ideally, the second hand market can function in such a
way that at the OEMs end the products can be re conditioned and sold.
Currently the market is highly unorganised with many online and offline local players selling second
hand products. Cummins in order to identify the scope of the market has started collecting CRM data
at the OEMs ends.
When we look at individual product segments, it is pretty evident that second hand DG market is more
relevant for the lower KVA rating machines. This was solely on the basis of cost. Therefore, Cummins
wishes to exploit the second hand DG market for lower KVA machines by venturing into it.
21
2. Best Practices from Existing Models
2.1 Objective
To study existing 2nd hand business models in both B2B and B2C segments whose nature of business
was close to our possible business model and learn their best practices and challenges.
2.2 Methodology
We performed secondary research by studying the websites and available reports followed by face-
to-face interviews and telephonic interview with company personnel to understand their business
model.
2.3 Mahindra First Choice

Mahindra First Choice is one of Indias first organized multi brand retailer in the field of pre-owned
cars. This is part of the after-market vertical of the Mahindra Group. Owing to the market of cars
which was expected to climb from 6 million in 2012 to 17 million in 2015, Mahindra group saw an
untapped opportunity and hence, entered this after market sector with Mahindra First Choice.
Today, Mahindra First Choice is spread across India with presence in 210+ cities and having more
than 375 outlets. Now, Mahindra First choice is divided into two segments of operations:
Mahindra First Choice Wheels This is the multi brand used car showroom part of Mahindra First
choice where they sell pre-owned cars with value added services
Mahindra First Choice Services This is the multi brand car servicing segment of Mahindra First
Choice where they service and repair cars from all brands.
Now, Mahindra First Choice operates through a franchisee based business model as a way of
increasing the dealer partnerships. Also, Mahindra drives this business model through some of its
current dealers. Currently, it has a network of 364 franchised outlets in more than 210 locations
(which include tier 1, tier 2 and tier 3 cities). This company is growing at a 35% CAGR by volume
over the last 5 years which is extremely impressive and currently, it covers around 7.5 lakh square
feet under its retail footprint.
MFCWL is also into the online auction space and it has sold around 1.5 lakh vehicles through the
Autobid auction platform as well. This has turned out to be a very successful business model
where MFCWL has won the Franchisor of the Year award as well in 2013.
Recently, Mahindra First Choice has come up with a new product called Indian Blue Book (IBB) which
is a unique car pricing guide. This has both the transaction data and analytics embedded in it. This is
a first of its kind product in India and hence, is rapidly gaining traction across the country.
22
2.3.1 Business Model
The business model of Mahindra First Choice is quite simple. It works on a Franchisee model through
which a First Choice dealership is built up. This network helps in running the stores across the country.
Procurement of the used cars takes place at the point of Mahindra Dealership of first hand cars.
Mahindra Dealership will buy back cars when a sale is being made and procure it for the First Choice
Store. Usually they charge a margin and give the car to the First Choice Dealer. Further on, Mahindra
First Choice charges a mark-up over and above the acquisition cost to get the final selling price charged
to the customer.
How much ever simple it may sound, the entire business model is quite complex. Based on the primary
research at the First Choice Dealership shops we were able to look into the model at more depth. A
detailed analysis of the Mahindra First Choice dealership was done under the following heads:
2.3.2 Key Participants

The participants in the model are Buyers, Sellers, Mahindra Dealership, Mahindra, and Mahindra First
Choice Stores. As per the primary research, the key participants are the dealership and the franchisee
network (First Choice Stores). Mahindra as an organisation has little to do with the entire format.
Mahindra basically acts as a facilitator in the entire process.
a) Mahindra: As discussed, Mahindra basically looks after the process. Brand name Mahindra is
an important parameter why customers come to First Choice. It is a famous brand therefore
it brings trust in the minds of the customers. Apart from that, the Mahindra also collects
franchisee fees from the dealers to who it has given the First Choice Dealership. This is an
annual amount and is directly paid to the company.
b) Buyers (Customers): is the main customer in the entire setup. Customers usually have pre-
decided which car model to buy and what the price point they are ready to pay for it. Usually
people who buy second hand cars have the brand and car make already made up in mind.
Therefore, there is little scope of up, down or cross selling. Buyers buy the car directly from
the First Choice stores. Mostly buyers are expected to pay the entire amount upfront as loans/
EMI might not be available on old cars (pre-2010).
c) Sellers: are usually Mahindra Dealership customers who sell their old cars in exchange of new
ones. They are the mediums through which Mahindra First Choice builds up the used car
inventory. Mahindra First Choice functions on 100% buy-back model. Therefore the dealership
23
are given this responsibility who sell the first hand cars to the customers. They buy-back old
cars during the process from the sellers.
d) Mahindra Dealership: are the first hand dealership stores of Mahindra. They have
responsibility to execute the first hand sales. They are run by Mahindra to hold inventory of
first hand cars which they sell. For the first choice they procure old cars from the customers
they are selling new cars at attractive price points and sell them to First Choice stores.
e) Mahindra First Choice: is the key player in the entire model. They are directly involved with
interacting with second hand customers. First Choice builds up inventory through the
dealership and sells the cars in the market at a margin. Many times it might happen that a
Mahindra first hand car dealership and the First Choice are owned by the same person. This
helps in smooth functioning of the First Choice business Model.
Buy Back
Model
Sales Inventory
Techniques Management
Mahindra
First
Choice
Maintanance
Financial & Value
Regulations Added
Services
Pricing
2.3.3 Inventory Management

Inventory is built up all round the year. Second hand car sales in India depend a lot on local festivals.
Maximum car sales happen in the month of March, April, October, November and December. In rest
all months, the market of the second hand cars remain bleak. However First Choice stores keep
building inventory all-round the year. If we go by the sales data of December 2014 and January 2015,
- for December, 35 cars were sold at Vikroli store itself as against 0 in January. This is a huge difference
because of the seasonality of the demand of second hand cars.
2.3.4 Maintenance and Value Added Services

Mahindra provides no value added services or maintenance service to the car once it is brought in.
Second hand cars are sold in the same state at which they are brought in the store. This might be an
unbelievable fact however as per the primary research Mahindra First Choice claims to sell the second
hand cars at the same state they procure it. Mahindra First Choice however does a strict screening on
multiple parameters during price determination. List of tests Mahindra performs on each car is
24
standardized and similar is the case with value added services like insurance, extended warranty,
accident cover and hassle free paper work.
2.3.5 Pricing
Price of the second hand cars is fixed based on its acquisition cost. Usually the price of the used car
can be anything 40% lower than the original price, however much of the value of the machine depends
on the current condition and number of kilometres driven. For a Rs. 2-3 lakh sale, the money the First
Choice makes varies anything between Rs. 25,000-30,000. Therefore, they add a margin of 10% on the
price at which they buy the car. In order to determine the cost of car, a strict screening is done to
determine the money to be paid to the dealership and whether the money the dealership is asking is
justified.
2.3.6 Buy-Back Model

It is an efficient model to develop inventory for a second hand model. It works on the principle that
whenever a new sale is being made, the customer would be willing to sell off the old car/ machine to
reduce the price of the current purchase. Therefore, the dealers who are selling new cars are able to
buy-back the used cars after the sale of first hand car is completed. As a result, inventory of the second
hand cars could be easily built up.
2.3.7 Financial Regulations

There are a number of financial regulations on the buying and selling of second hand cars as noted
during the primary research. For the second hand cars that were bought prior to 2010, no financing
or EMI options are available therefore for cars prior to that period a down payment has to be paid.
However, usually, as the dealer mentioned during the interview, cars that are sold through First Choice
are mostly post 2010 cars and hence for these cars, options like loans, financial and credit support and
EMI are available.
2.3.8 Sales Techniques

Mahindra First Choice uses no medium for sales technique. It is in the business of selling old cars.
Therefore their biggest selling point is low price points. However Mahindra brand works for them as
a customer puller. As per primary research, we were able to deduce that Mahindra First Choice now
spends no money on advertisements to attract customer. Customers come to them. Customers have
a fixed mind which car they have to buy and they buy accordingly. Sales happen based on cars
availability. If the car is not available the customer will go to the next dealer. There is no scope of
building loyalty.
25
2.4 Gujarat Generators
Gujarat Generators deal in a very unique business model. They started as a rental and maintenance
service provider for DG sets. However, in the past two years they have expanded into the business of
selling second hand DG sets. They are establishing this line of business and integrating it with their
other models. They procure second hand DG sets from the market and sell them in their second hand
stores. For the past two years, they have been able to identify the potential of the market and are
reaping huge gains from it. As discussed during our interview, it was clear that margins that could be
made in this business were unlimited.
Gujarat Generators runs a separate channel for the second hand DG sets. They directly interact with
dealers and agents and buys DG sets from them. They keep a huge amount of inventory which is quite
difficult in this business given the high holding costs involved. For servicing of these DG sets, they have
created a separate entity. This entity is responsible for completing the servicing of the machine. These
DG sets are sold under the brand name of Shree Shyam. The entire model of Gujarat Generators can
be discussed under the following headings:
2.4.1 Business Model

The business model of Gujarat Generators is similar to Mahindra First Choice. The only key difference
being the following:
a) Procurement: is carried out as one of the key activities. Procurement is done through leads
generated by the agents and dealers. Buy-back of the DG sets is not the only medium as was
the case in Mahindra First Choice. Stress is given getting more and more DG sets available in
the market.
b) Servicing: of the machine is done and a 6 months of dealers warranty is provided on sale. In
order to perform servicing, a separate entity has been created which executes the entire
process. Post servicing, the second hand DG sets are sold under a separate brand called Shree
Shyam.
c) Machine Shop: The Company sells through a huge B2B machine store. Both first hand and the
second hand DG sets are sold through the same channel.
2.4.2 Participants
Key participants in this model are the sellers, buyers, Gujarat Generators and Servicing Agency. These
are the key main players apart from the dealer and agent network.
26
a) Sellers: Selling of the second hand DG sets is done through dealers and agents. Agents
generate leads on sellers and accordingly Gujarat Generators absorbs the product through the
network. Sellers are usually low KVA machine owners. Many a times these are people who are
planning to buy a new machine and sell the old machine through buy back.
b) Buyers: of the second hand DG sets are people who are looking forward to buy the second
hand DG sets. They are people primarily in the rental business who form regular customers of
second hand DG sets. Buyers look at 3 major factors - Price, Services and the Brand of the DG
set. Price plays a very important role. Price of the second hand machine is usually 30-40%
cheaper than the first hand machine. In terms of services, customers get attracted to this
company because on the second hand machine, it gives a warranty of about six months.
c) Gujarat Generators: acts as the key facilitator of the entire business model. It tried to support
its existing first hand store through this model. It enables dealer and agent network both to
buy DG sets from the market and sell those DG sets in the market. Gujarat Generators has
plans to strategically introduce this medium to buy second hand DG sets in other places apart
from Gujarat as well. Gujarat Generators also owns a separate entity for Servicing. Servicing
is an important part of the model because they are able to attract more customers through
the warranties they provide. Therefore this entity plays a very important role.
d) Agent & Dealer Network: is also a very important part of the model. It helps Gujarat
Generators in performing the following:
Procurement: Agents and dealers help in procuring the DG sets. They help in lead
generation. In some case the entire procurement process is driven by these agents.
These agents charge a fee up to 2-5% of the realised cost. They also help in scavenging
as many DG sets as possible. They play a very important in this model because Gujarat
Generator handles very large amount of inventory and hence it needs a number of
sources for procurement.
Sales: These agents and dealers helps to push the DG sets in several cases. They again
charge a commission of 2-5% of the total price of the machine. Dealers have direct
relation to customer therefore they bring the customers to Gujarat Generators and
help in converting potential leads to sale.
2.4.3 Machine Procurement

Procurement takes place through several mediums like online, agents, network, relationships etc.
They keep an inventory of about 100 second hand DG sets. Keeping this high quantity of DG sets as
inventory attracts very high holding cost. However, they are able to meet the costs by keeping sales
optimum. This model is still under trial so much could not be commented on during the primary
research on Gujarat Generators. Inventory of second hand DG set is built up to meet the requirements.
Currently, they are selling DG sets only in Gujarat. However they have plans to expand outside Gujarat
very soon.
Usually, customer leads are received from agents and the dealer network. Agents charge 2- 5%
commission on the goods that is sold to them. Logistics of the machine is usually handled by Gujarat
Generators. However, in several circumstances, the cost is borne by both the supplier and buyer as
per the negotiations. Negotiations play a very important role in determining the cost.
27
Buy-Back model also works very well with Gujarat Generators because they are able to push their new
products through that medium. Due to high commissions to the agents in a number of cases, agents
and dealers scavenge second hand DG sets and try to sell it to them. Commissions however depend a
lot of the demand of the machine and its current state.
Machine
Procurement
Marketing & Customer

Sales Decision
Gujarat
Generators
Model
Servicing
Pricing
Entity
2.4.4 Customer Decision

Customers primarily belong to the DG set rental business. Customers decision is usually based on two
major factors. One is price and second is value adding features like warranties. Price that Gujarat
Generators offers is nearly 30 -40% less than the market price of the first hand machine. Moreover,
Gujarat Generators provides a warranty of 6 months. Apart from that they only provide products that
are branded. Customers are also very particular of which brand of product they are buying. Usually,
customers show inertia towards a brand of their preference. Customers do not change their
preferences very easily. Even though Gujarat Generators self-brands the machine to some extent,
customers look into which brand the machine originally belongs to. Gujarat Generators only keeps
DG sets between 62.5KVA and 250 KVA.
2.4.5 Pricing
DG sets are priced based on the total cost parameters. Ideally, a second hand machine is 30-40% cheap
than the cost of the machine in the first hand market. Chief cost parameters include cost of the
machine, logistics cost, quality check, warranty. Margin is added over and above this. Margins range
somewhere above and around 10%. However, under some circumstances wherein the bargaining
power of buyer is low, the margins can go very high depending on negotiations. Concept of
refurbishing: DGs after they are acquired can also be refurbished and then sold through a separate
entity. Refurbishing is not reconditioning and it is much cheaper.
2.4.6 Servicing Entity

Gujarat Generators has created a separate entity to take care of the servicing requirements. Servicing
is done on all the DG sets which come through the second hand channels and are then rebranded as
Shree Shyam. Apart from rebranding, a six month warranty is also provided with the machine to
facilitate the sale and make it more lucrative for the market.
28
2.4.7 Marketing & Sales
This forms an important part of the organisation. Since Gujarat Generators rebrands its products,
therefore, its sales and marketing techniques become very important point of discussion. Usually the
company follows the following methods to further its cause:
Online presence: Products are listed on online mediums. However, online presence helps more in
brand creation rather than lead generation.
Agents: It is the key medium of sales. Products are pushed through agents for a commission.
Agents bring in lots of leads of where the product can be sold.
Cross Selling: Sometimes when the customer wants a cheaper product instead of a costly product
they try not to lose the customer by selling a second hand DG set wherever applicable.
29
3. Insights from Online OLX Listings of 2nd Hand DG Sets
3.1 Objective
None of the dealers or OEMs have a proper record of the 2nd hand DG listing or queries that they get.
A better approach was to analyse the data listed online which varies across geographies, companies,
dealers, price and KVA ranges as well as usage. Data from OLX was analysed to have a better
understanding of the current second hand DG market and the churn happening for various companies
in this market.
3.2 Methodology
Data was pulled out manually from OLX.com and then copied on an MS Excel sheet. This data was
analysed and insights to understand the current market scenario were found out from the same. To
give a better perspective and to analyse the data holistically, more than 300 listings of 2nd hand DG
sets on OLX were recorded and analysed to get various insights on 2nd Hand DG market.
3.3 Overall Market

Based on analysis of listings data obtained from OLX website, the market share of Cummins (by
volume) is as follows:
Market Share of 2nd Hand DGs
From the above, we can observe that Cummins has second largest market share in Second Hand DG
market with a 17% volume market share trailing only Kirloskar having a volume market share of 33%.
We can also note that Non-Branded (locally assembled) DGs also have a significantly high market share
of 22% by volume.
3.4 2nd Hand Product Segment Mix - Cummins

When analysing the break-up of Cummins 2nd hand listed DGs by KVA rating as shown below, we can
observe that majority (51%) of its 2nd hand sales are accounted by medium rated DGs (75 to 375 kVA):
30
Cummins Category Share (2nd Hand)
3.5 Product Segment Mix 2nd Hand Market

While studying the 2nd hand market by product segment (shown below), we observe that entire
market is focused on small DGs (<75 KVA) with 54% share by volume. Also, sales of large DG sets is
quite low.
The table below also indicates high level of fragmentation in the small and mini product segments
with non-brand DG sets too showing significant market shares in the volume sales.
Product Segment Mix
On studying the product segment split of major players in the industry we observe that Cummins
major competitors have more than 60% volumes driven by Small DGs whereas 51% of Cummins
volumes come from Medium DGs (75-375 KVA) and only 35% from Small DGs (<75 KVA). Also,
Cummins mainly competed with Caterpillar in the High KVA segment.The product segment shares of
these players in 2nd hand DG set market are similar to their respective shares in 1st hand market.
31
Product Segment Mix By Company
3.6 Geographical Analysis

To understand the geographical spread of the 2nd hand DG set market, we analyzed the sources of the
listings. As seen in figure below, we observed that 2nd hand DG market in mainly concentrated in South
and North India with 45% and 36% share respectively with negligible presence in the eastern region.
We can also observe that Kirloskar has a very strong presence in Southern India with highest listings
in that region. In North India, we can see that there is more focus on non-branded locally assembled
DGs, an observation verified by a dealer we interviewed as well.
Geographical Analysis
3.7 Pricing Analysis
32
On studying the pricing of these 2nd hand DG sets, we observe that price ranges are higher for low
KVA segment and it starts converging as KVA rating increases. As indicated by the dealers, the prices
vary and depend on the condition and brand of the DG set.
The level of discounts indicates the potential benefit 2nd hand DG sets can provide to price sensitive
customers. Very low price index for 0-10 KVA Rating segment is due to the presence of higher
number of non-branded low priced DG sets in this segment.
33
4. Findings from Key Stakeholder Interviews
4.1 Findings from Dealer Interviews

4.1.1 Objective
We spoke to the dealers on various topic related to this project mainly understanding their business
models, how do they manage customers, how do they manage the second hand DG market and what
parameters the customers look at while choosing a DG set.
4.1.2 Business Models

From our interactions with dealers, we found that the business models operating in the market can
be categorized into two different models. These are buy back model and inventory model. Based on
the capabilities of the dealer, and his business, he can choose which model to use to run the business.
Final models that have been suggested at the end of this report use these two models as their base.
4.1.2.1 Buyback Model

In this model, the DGs are bought back by the dealer and stored temporarily or sold off immediately.
Basically, the main characteristic of this model is that the dealer buys the old model, which could be
of any brand while making a new sale to the customer. The dealer, while selling the new DG set, will
take a look at the old set, and determine the approximate value the old DG set. The buyer will have to
pay the difference between the old set and the new set apart from giving the old set to the dealer.
Then, based on the capability of the dealer, he can perform some tests on it to check its goodness for
use and sell it off to the second hand market as fast as possible without holding it as inventory for a
long duration. Hence, the bought back DG is immediately sold off to prevent blockage of space and
funds.
Tests and Checks

based on capability
Buyback of
2nd hand DG
First hand Second
Customer hand
Dealer market for
Sale of 1st DG sets
Hand DG
Advantages of Buyback Model
This model helps push new products in the market and the customer faces no hassle in disposing off
the old DG being used by him. With this, the consumers also get a wide variety of gensets to buy even
in the second hand space. Also, as the dealers sell the used DG immediately in the second hand
market, there is an increased supply and variety of these second hand gensets in the market. Another
positive point about this model is that it improves customer base implying that in case a customer
comes up to buy new DG or when they need a replacement, and dont have the budget for a new
34
equipment, the dealers can push the old DG sets in this model and thus improve customer
relationship.
The biggest advantage of this model is that it doesnt bind the funds and inventory in the hands of the
dealer. Dealer buybacks only those DGs which are high in demand and can be sold off instantaneously
in the market.
Disadvantages of Buyback Model
This models limits the variety of products that can be made available in the second hand DG market.
Moreover, the model can result in losses to the dealer in case the DG purchased by him doesnt find
a new customer and becomes too obsolete to be sold off in the market. These risks are to be taken up
by the dealers themselves.
4.1.2.2 Inventory Model

In the inventory based model, the dealer has to acquire the inventory through mediums other than
the buy-back model. Buy-back model works in such a way that while selling a new DG set an old DG
set is bought back from the same customer. Accordingly, an inventory is built up. In an inventory based
model second hand DG sets are bought in the market through the agents and as per the demand sold
to the second hand customers.
Tests and Checks

based on capability
Existing Second
Network hand
Dealer market for
DG sets
Procurement
of 2nd hand
genset
Inventory
This a not a very popular model currently because holding DG Gensets as inventory is a very costly
exercise. For an inventory based model to function wherein the DG sets are continuously being
procured from the open market, the holding cost rises exponentially. Therefore, small dealers do not
usually hold inventory. They basically work through the buyback model. Also, in the case of the
buyback model there is an incentive for the customers to sell their old DG sets in exchange for a
reduced landing price of the new DG set. However, there is no such benefit in the inventory based
model. Dealers have to keep looking for second hand DG sets in the market (cost to the dealers) and
after procurement pay for the logistics, transportation and the agents fee. Relationship with the
35
agents become an important factor in this model because they are the people who will drive the
availability of second hand DG sets.
Multi Brand Model Applicability: Dealers who deal in selling multi brand DG sets usually can go for an
inventory based model because for them buy back model will not completely work. In order to develop
inventory at the dealers site, dealers will have to engage agents and other channels to procure more
and more DG sets.
Advantages of Inventory Model
This model is a sustainable model which helps serve the needs of various diverse customers. Since the
model does not solely depend on the buyback of the DG sets, procurement of DG sets can happen
across brands and KVA ratings. For a pure inventory based model, the customer will have an option to
buy multi brand products therefore value proposition becomes more refined. Apart from the benefits
to the customer of product availability, from the dealers point of view there are following gains:
Churn in the 2nd hand market increases because DG sets are directly being bought and sold in
the market
Dealers can drive volumes in the market place because the availability of DG set when needed
increases
Dealers can drive better margins because better products become available
Agents can generate more commission from the increased sale of multi brand products
Disadvantages of Inventory Model
The major cons of this model are the space and funds constraints. For any dealer or the agent, both
inventory holding capacity and access to funds are a big constraint. Therefore, this is not a very widely
followed model. DG sets which are being bought in the second hand market have to be serviced and
accordingly stored at the dealers place. These DG sets attract a very high holding cost. Therefore, in
this model since the dealers plan to drive numbers (increase the numbers of sold products) it becomes
important for the dealer to have access to inventory holding space and enough funds if the DG sets
keeps lot of space tied up (cases where sales get delayed).
For a successful model implementation, access to credit and funds is pre-requisite because of the
competitive market place. Since agents try to sell DG sets to highest bidder who decided to purchase
first, therefore access to funds is an important criterion for dealers to sustain this model.
4.1.3 Operating Channels

From the second hand market analysis, we were able to identify several channels that the second
hand models were currently using. The second hand channels were quite different from the first hand
channels. From the conversations we had with the dealers, these were the major channels they
currently operated in for the second hand DG business.
a) Agent Network
Dealers have a geographically spread agent network. These agents work on commission basis
and have their own huge networks. These agents help in facilitating sourcing and selling of
gensets. The agents have no inventory holding capacity of their own. Typically they earn 2-5
% as commission, and they help in getting new customers to the dealers, as well as new
suppliers of second hand DG sets.
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b) Online Channel
This is another channel for the dealers to increase their prospective customers for second
hand gensets. This includes sites like Indiamart, OLX, Quikr, Sulekha.com etc. The leads that
the dealers get through this online channel are mostly from the urban areas, due to better
internet penetration and operating knowledge. From the past one to two years, with the
increasing reach of the online channels, the lead generation through online channels has
increased manifold.
c) Client Relationships
The dealers have their own client networks where they manage relationships with their
clients. This is also a good channel to sell second hand genset to the existing customers in case
they have any requirement or need an extra genset, or want to replace a genset with a
different one. In these cases, the dealer can push the second hand genset to the clients based
on the trust and the goodwill earned by them.
4.1.4 Demand
Demand for the second hand DG sets cannot be directly measured. However, as per our conversation
with the customers, dealers, OEMs and sellers, we were able to acknowledge the fact that the second
hand market was definitely strong and booming. A number of DG sets were sold across India on a
monthly basis and there was a considerable scope for organizing this market. If we look at the number
of enquiries as a proxy for demand of the DG sets in the second hand market, on an average every
dealer that we talked to received up to 10 enquiries per month regarding second hand DG sets. Also,
most of enquires that came or the DG sets that were sold were mainly in the low KVA segment. This
can translate to one enquiry for a DG set per 30 enquiries for a first-hand product. In some cases,
however many dealers pushed second hand products wherein the customer was price conscious and
did not specifically want to buy a first-hand DG set.
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4.1.5 Margins
According to the dealers, the margins are unlimited. The price range of second hand DG sets is also
very variable. It totally depends on the number of running hours, brand and working condition. Hence,
the dealer can earn a lot of margin on a single DG set or earn very less margin. So, the scope of margin
is theoretically unlimited, as quoted by some dealers. It depends on the bargaining power of the
stakeholders involved in the transaction. But typically, the dealers get a minimum 5-10 % margin on a
second hand DG set.
According to an example given by a dealer,
4.1.6 Online Presence

Many of the dealers had very low online presence and they were selling second hand DG sets mainly
through agent networks and their own client relationship management systems. However, in some
cases many of the major leads that the dealers got were from OLX and Quikr. Online Mediums like
OLX and Quikr play a very important role today in the marketplace. In the past two years the churn
through the online medium has increased manifold due to the increase in the reach of online
mediums. Many of the leads that the dealers received online were majorly from urban areas. Hence,
overall, the online presence of the dealership network in the second hand DG market is less but
growing considerably.
4.1.7 Customer Base and Customer Types

The customer base the dealers had was pan-India. They received orders and enquiries from all across
India for second hand DGs. For example, a dealer in Solapur had made a sale to a customer in Kolkata
through an agent.
The major customers were SMEs who needed DGs to run their companies but didnt have the budget
to buy a new one. Another type of major customers were construction sites. They needed DG sets to
run their power machines till they got power from the local municipality. Also, factories like sugar
factories and dairies needed DGs for daily operations. These were some major customers for second
hand DGs. Another major chunk of customers for second hand DGs were the Generator rental services.
So, these generator rental services had their own dealer, decorator network so that generators could
be made available when required. Typically, these generators were needed at weddings, parties and
seasonal demands, like during festival times.
One major point which dealers told that Industries and places which need DG for critical processes
generally dont opt for second hand DGs, because they dont want to compromise on quality, and
hence they dont mind spending extra money to ensure that the DG they get is the best quality and
reliable.
According to the dealers, the customers had specific requirements for which they evaluated the DGs.
Some major factors which the customers looked at while making the buying decision of the DG are:
38
Fig: Customer Value Proposition Value Pyramid
Warranty & Other Value

Added Services
Brand Name Arrow denotes

value Proposition
from Basic to
Expected/
Working Conditions Potential Needs
Price
1. Price: of the product is one of the criterion why a second hand DG set is preferred. Second
hand DG sets are usually price 30-40% lesser than the first hand DG sets. Therefore price
becomes a key differentiating factor.
2. Working Condition: This includes the running hours and condition of the DG set as well.
Number of running hours was a proxy for the working condition of the DG set. Usually, the
number of running hours was properly assessed
3. Brand: Here, customers are brand agnostic but desire a branded product. People do not
differentiate between a set of brands and expect the product that they buy from the same
list. However, under some circumstances when a product belongs to a brand that the person
is already a customer of, he might prefer the same brand.
4. Warranty and Guarantee and other Value Added Services: These were also a key value
proposition that a number of customers expected. Since DG sets fall into the purview of capital
goods, these services were usually expected by the customers
4.1.8 Scope of an organized player

Majority of the dealers we spoke to welcomed the idea of an organized player like Cummins entering
this market. They shared the following perspectives:
Trust & Relationship: The dealers felt that Cummins entering this market will help provide quality
assurance and improve the trust related to second hand gensets amongst the customers. They felt
that such a thing will also improve their trust in the eyes of their customers and were willing to partner
with Cummins on this.
39
Trust &
Relationship
Future
Multi v/s Value
Single Brand Scope for Proposition
Cummins
Current v/s
Future
Pricing
Value Proposition: For the customer, this model will definitely be beneficial. Customer will have a
better connect with Cummins and due to the business model many value added services will be
available to them. Customer in many cases like Gujarat Generators will have access to a number of
services and warranty certificates which were previously not available in the unorganized model
functioning before.
Current v/s Future Pricing: A concern maximum dealers showed was rise of price once an organized
player comes into the market. They felt that their margins may get reduced and even customers will
prefer others as the price of the DG set will go up due to the brand name attached to it.
Multi v/s Single Brand Approach: All of the dealers suggested a multi brand approach, where they said
that it will help them enable meet customer specifications and demand for competitor Gensets.
However, as discussed with both Cummins and Powerica, running a multi brand model will be very
difficult because of conflict of interest in the first hand market and also that dealers/ agents loyal to
Cummins will have to be trained to sell products of other companies. It might make the model more
complex.
4.2 Findings from Agent Interviews

Agents are an important part of the entire ecosystem. We spoke to two agents, who were part of this
agent network. We got the contact numbers of those agents from a dealer who regularly gets
enquiries and orders from them. Agents basically acts as a facilitator for the entire business model.
Following are some of the key insights with respect to the agents:
4.2.1 Objective
Agents were interviewed to understand the market from their perspective, functioning of their
business model, their roles and responsibilities and to note their views on any organized player like
Cummins entering the 2nd hand DG set market.
40
4.2.2 Background
Agents usually belong to the same industry. Educational qualification of these agents can be upto
graduation. They have worked previously in this sector therefore they have good contacts. Apart from
good contacts, due to previous experience of working in/with companies like Cummins, OEMs or
certified dealers, they have required skills and know-how to facilitate the entire business model.
Agents maintain a database of the DG set requirements, customer details and dealer details. They
usually charge a commission fee for each sale. The key property of the agent is the network details
that it owns.
Background
Agents
Responsibilites
Business
Model
4.2.3 Agents Business Model

Agents work a commission basis. Since they help both the buyers and sellers to meet they charge a
commission from both the parties. Usually the commission of the agent is fixed at 2- 5% of the final
sale value of the DG set. However, the commission varies due to personal relationships in this business
to business networks. Sometimes, for a single sale at different levels, several agents might be involved
and each agent with keep a commission on the final sale value.
4.2.4 Key Responsibilities

Agents act as the key facilitator in the model. They try to use the network to make dealers and sellers
of the DG sets meet. Following are some of the key areas wherein they play a very important role:
Geographic Presence: Their network is spread across India, and they handle enquires from
outstation dealers and customers as well. Due to their geographic spread and reach, they are
able to service requirements across India through their network.
Personal Relationship: They have a set of dealers whom they have agreements with, where
they refer customers and increase the sales of the dealers. Accordingly, they attract a
commission as agreed during the negotiation with the dealers and customers.
Agents are an integral part of the ecosystem of the genset industry and also help in servicing
and maintenance by having a list of the service dealers as well. They provide not just buy and
sell options but a lot of network and logistics support to the dealers when required.
The agents we spoke to welcomed the idea of an organized player entering this market and said
that the trust factor of the customers will increase with this, and it would be good for their
41
business as well, since then they would have the potential to earn more in a purchase due to
higher price than earlier. Agents will be an important part of the newer business model due to
their network knowledge, connections and relationship with several customers and dealers across
India.
4.3 Findings from OEM Interviews

OEMs plays a very important role in the entire business model of Cummins. OEMs works as a facilitator
of the entire business model. It owns the entire dealer network which it leverages to sell Cummins
manufactured products in the market. Cummins works with three OEMs which are geographically
separated across India. Following are some of the insights from the OEM point of view on the second
hand diesel generator market.
4.3.1 Objective
The OEMs were interviewed to understand the market from their perspective, functioning of their
business model, their roles and responsibilities and their outlook on any organized player like
Cummins entering the 2nd hand DG set market.
4.3.2 Market & Business

Opinion about the market: OEMs will not have any problem to help Cummins in setting up the
business. There have a very strong relationship with both Cummins and the dealers therefore this
relationship will be the driving factor. Moreover, due to increased sales, the business of OEMs
(Powerica) will also thrive. The second hand market is currently not regulated and therefore scope for
an organised player is very good. Presence of the OEMs in the market will be better if such a model is
developed.
Working Models (Single v/s Multi Brand): Currently, both single and multi-brand dealers are available
who in deal in second hand machine sales. Based on the primary research, however, the OEM said
that working on a multi-brand strategy would be very difficult. OEMs have a very strong dealer
network of Cummins which will help in establishing the process for single-brand. However, for the
multi brand model, OEMs will have a conflict of interest with other brand machines. Dealers might
have to be provided training for them to learn to sell other brands.
Service Network Development: Service Network would be an important thing that the dealers will
have to develop. Services will be a key selling point to the customers. Therefore, it will be an important
point of discussion. Cummins has a good service network. At some places like in Mumbai, the network
is operated by OEMs only. However, using the service network for servicing the DG sets would be
difficult. In order for servicing to happen, the OEM said that it can be done at the site of dealers.
However, dealers will have to do the following:
Dealer Capability
Management
Service Network
Development
Warehouse
Management
Dealer Capability Management: Dealers will have to build up capability to do servicing and get
itself certified by Cummins. They will also have to provide required training to engineers,
42
managers and workers. Usually, the dealers have qualified and trained staff. However, they
will have to be certified too. For the initial model, development capability will be a high spend
area.
Ware House Management: Space requirements of the dealers will go up once they go for the
second hand model. Dealers will have to maintain the space to keep, store and service
inventory of the machines. Ideally, as discussed by Mr Pawar, the point in the entire value
chain (dealers) that is selling the machine should maintain the inventory. Otherwise, it will
complicate the entire structure of functioning. If the dealers are buying and selling the
machines, OEMs should only act as a facilitator and dealers should invest in capacity or
inventory. While bringing dealers on board, inventory holding capability will have to develop.
For the second hand dealership, an inventory space is a must. This is because people who buy
second hand machines would always like to visually see the machines. Therefore, a
warehouse/ inventory storage area is a must. The holding cost of the machine is very high.
Maximum dealers do not have space to keep more than 10 diesel gensets. On an average
dealers can store around 4-5 DG sets. High number of Gensets are also not kept due to tax
issues.
Customer Profiling: Usually, the second hand DG set that is purchased is of the same brand as the first
hand machine. The inertia in this market is very low because more or less all products are similar and
hence customers usually go with the old brand. Major customers are the owners of rental business of
diesel generators. However, sometime customers prefer Cummins over the other brands even though
it might be a little costly only because Cummins is known to have better quality products.
Customer
Network
Agent Online
Network Network
Online Portals: Currently, maximum queries come through online channels. Online portal engagement
of the dealers and customer is increasing every day. More and more customers are coming on board
as the reach of internet increases. Therefore, it will be a good idea to start a portal. Portal can be
handled centrally by OEM or Cummins for smooth information flow.
Agent Profile: Agents are free lancers who have good experience in the field. They are people who
have worked with companies like Cummins, its OEMs, dealership network or some part of the business
and has good knowledge of business and good connections in the network.
4.4 Findings from Customer Interviews

We managed to talk to around 25 customers to understand their point of view about the market. Out
of the customers we talked to, some of them were generator rental services, some construction
contractors, some SMEs in Mumbai and Nashik, some hospitals and medical companies, some
decorators and some manufacturing SMEs. Individual customer as per the line of business had
different points which they considered while buying a second hand DG set.
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4.4.1 Objective
The customers were interviewed to understand their buying process, the decision making parameters
and their opinion on purchasing 2nd hand DG set from an organized player if given an opportunity.
4.4.2 Findings
In order to identify key insights from the customer side, we tried to identify key parameters which are
important for the customers. We came with a few factors on which each customers response could
be discussed. We have tried to analyze the customers on the following parameters:
Procurement
Customer Profile
Rental Construction/ Decorators/
Business Real Estate Party halls
Customer
Agent Profile
Analysis
Customer line of Business Across Industries
Decision
Hospitals & IT/
Parameters
Medical SMEs Corporate
Facilities Offices
Future Scope
Following are some of the insights of the usage and requirements which we were able to get from the
customers:
4.4.2.1 Generator Maintenance and Rental Business

a) Procurement: The generator rental dealers have an existing dealer and agent network through
which they source the second hand DG sets for rentals. They have built this network over time
from when they started
b) Agent Profiling: When asked about agents, they just said that the agents were freelancers who
had worked with a dealer or a company like Cummins/Kirloskar/any other DG manufacturing
company and know about DG technicalities and have relevant contacts. For some rental stores,
the agents are fixed and for others, they can vary from project to project. They are responsible for
facilitating the sourcing and selling of second hand DG sets and big agents have a nationwide
network. This part is one of the ambiguities as its completely on the generator hiring company
which agent is permanent and which gives temporary customers to the company. The commission
to the agent given lies between 2-5 %.
c) Decision Parameters: All rental dealers said that some parameters which influence customer
buying decision are
44
i. Working Condition: This includes running hours, and working condition of the DG set. This
is important for reliability issues and one of key factors customers look before buying.
ii. Brand: The customers are brand agnostic, but prefer a branded DG. That means that
customers dont generally prefer a specific Cummins or Kirloskar DG, but they prefer a DG
which falls in the family of known brands like Cummins, Kirloskar, Mahindra, Eicher,
Mistubishi, Tata, Birla etc. In general, the rental stores told us that in higher KVA, Cummins
has more value than other companies, and customers prefer Cummins generators as they
have a better trust factor than others. Also, some dealers told that they prefer to buy
second hand Cummins gensets for giving rental as Cummins Gensets have higher buyback
value than any other competitor.
iii. Pricing: Price is one of the major factors which the customers use to make their buying
decision. In this case, the customers are looking for the best deals. Hence, if they get a
decent to good quality DG at a lower price, they will definitely go for it if the usage of the
DG is for non-critical purposes
d) Future Scope: When we asked the rental business owners about their view about an organized
player entering the second hand DG market, they welcomed the idea but they made a point that
they would prefer a multi-brand business model. The reason they gave for a multi-brand business
model was that the end customer needs some choice into what DG he/she would like to rent. And
since more choice is present in the multi-brand business model, it would be preferable.
4.4.2.2 Construction Contractors

a) Customer Profiling: Construction contractors need DG sets for both critical and non-critical usages.
When there is a project, in the initial phases, there is no electricity provided to them. Till the local
municipality provides them with an electrical connection, everything they work on would run on
DG sets. Generally, initially, the DG set is first used for critical processes and then once electricity
is available, it is used as a power backup, which is a non-critical use of the DG set. So, generally,
for projects where electricity availability is relatively lesser, the construction contractors buy first
hand DG sets because they cannot compromise on quality. But in case the project is in an urban
locality and there is easy availability of electricity, then the major usage of the DG is for non-critical
purposes. In this case, there is a chance of the construction contractors buying a second hand DG
set
b) Decision Parameters: For the contractors, some major decision parameters that help them choose
between a first hand and a second hand DG set is price, warranty and working condition. To all
the contractors we talked to, everyone said that they look for how many years warranty is
provided, and what kind of maintenance is provided for the DG set. Since, they want to pay
minimal attention to the DG, and they require someone to take care of the complete maintenance
and service including warranty of the DG set. For them, dealer trust is also very important while
choosing to buy a DG set, may it be first hand or a second hand DG set.
c) Future Scope: For the construction industry, the need for the second hand DG set is limited to only
non-critical activities therefore there is not a very huge demand for second hand DG in the market.
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4.4.2.3 Decorators and Party Halls
These are the customers who provide the DG set to be used during parties at several occasions. Many
a times they do not own the DG set but supply the DG set through a rental service network. Key
parameters for these customers are as follows:
a) Procurement: of the DG set takes place through the agents. They have good relationship with
several agents who keep supplying these DG sets. Agents usually charge a fee for the same.
Sometimes as per their business model they might not own the DG sets and use DG sets which
are acquired through a rental network.
b) Customer Profile: For these customers, the use of DG set is there only for parties, weddings or
special events. Hence, again, the use is non critical. When we spoke to decorators, they said that
generally they serve local customers for parties, marriages and other special events. They give an
option to the customers if they would want power backup. If the customer requests generator
and power backup, they have a network of rental dealers from which they take a DG set on rent.
Generally, the rental dealers provide DG sets on rent with charge per 8 hours.
c) Decision Parameters: Customers of the decorators don't know specific requirements of DG sets
but the decorator knows from experience so he gives the DG sets to customers himself. No extra
charges on DG sets are charged from the customer. Approximate rent the decorator pays to the
dealer is Rs. 9000 for 8 hours for a 16 KVA DG set, and he charges the same from the customer.
The decorator gives customer the best deal in terms of price, and mainly transactions happen due
to good relationship with the rental dealer and decorator. The key points to be considered in the
decision making parameters are price, brand name, condition and relationship with dealer and
agents.
4.4.2.4 Hospitals and Medicals

Customers that come under this category are hospitals and medical facilities who have a critical need
for the DG sets. If these people do not get power on time it might cause a serious problem to occur.
Under such cases a DG set is maintained which is highly reliable.
a) Customer Profile: For hospitals, the DG sets are needed for critical purposes, and they cannot
afford to compromise on the quality of the DG needed for the hospital. As already, huge
investments are made in hospitals and so, they generally dont prefer second hand DG sets. These
are the customers who look for reliability over anything. They are ready to pay more but expect
excellent service and a DG set which would run as per requirements.
b) Decision parameters: Diesel Generators that are bought by the hospitals and medical facilities
depend on a number of factors. They are not price sensitive. They mostly buy first hand DG sets
because of reliability. The trust on the second hand DG set is less comparatively. They change the
DG set every 4-5 years for the same reasons. Decision parameters to go for a specific DG set also
depends upon governmental norms on that institution.
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4.4.2.5 SMEs
These were the customer from Small and Medium Enterprises who were using DG sets for various
critical and non-critical activities. Some of the key insights that we got from them were:
a) Procurement: They usually buy DG sets from their local dealer and agents with whom they have a
very strong relationship. They basically base their entire business decision on relationship.
b) Customer Profile: We spoke to SMEs in the printing, IT and manufacturing field and we got quite
a lot of insights on how these customers view the market of second hand DG sets. One SME we
spoke to had a second hand 10 KVA Kirloskar DG, which they had bought from their trusted dealer.
These customers belong to several industries however they used lower KVA DG sets as per
requirements.
c) Decision Parameters: We see that in SMEs, the business works on relationships. Hence, the SMEs
have relationships and trust with some dealers, and they generally buy everything related to their
power needs from them. These trusted dealers also provide them with best deals for servicing and
hence, they prefer to go to the contacts of these dealers to maintain the relationship. For critical
processes, they dont go with second hand DG sets and preferably buy first hand DG sets as they
cannot compromise on the business operations. Also in some IT SMEs, generators are required for
critical processes. So they also prefer first hand DG sets. For non-critical processes, all SMEs buy
from their trusted dealers, may it be first hand or second hand. According to the SMEs, their most
important parameter for buying decision is the trust of the dealer and the working condition of
the genset. Then comes the price and the brand. In this sector, the chances of switching DG brands
are slim as when the customer starts using a DG and is happy with it, doesnt easily switch to a
different brand of DG sets.
d) Future Scope: When we asked about their views on an organized player entering this market, they
welcomed the idea, but they stressed on the point again that as customers, they need trust as
well as they need choice. Hence, they preferred the multi-brand business model of second hand
gensets. They said that they would welcome a move by an organized player to certify second hand
gensets and they were even ready to pay a premium for branded certified second hand genset.
4.4.2.6 IT/Corporate Offices

These are the customers who work in office spaces. Following are some of the key insights from their
business:
a) Customer Profile: These customers are people who work in corporate offices and may need the
DG set for day to day activities in cases of power outage. They are very concerned regarding the
reliability of the DG sets. They will never go to buy second and DG sets. This is because they want
100% of reliability from the DG sets they buy. They are not very sensitive to the price of the DG
set as long as the DG set is working fine and there is zero probability that power will go out.
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4.5 Insights from CRM Data
On the analysis of this data, we found the following insights:
Customers have a low knowledge level regarding the generator market. At an overall level, 39.87%
of the customers dont know the product they want to buy. In case of lost sales by Cummins this
is much higher at 58.22%
Although Cummins has schemes to provide financial support to its prospects, only 0.11% of the
prospects actually show interest in the scheme which is minimal
Of the total lost sales which constitute 11% of the total records, 6% are due to price issues, 4% are
due to budgetary constraints and only 2% of the prospects opt for buying 2nd hand diesel
generators. These customers can be contacted to get their inputs on the features of their purchase
48
5. Proposed Business Models
Through the primary research done at various levels we were able to identify key factors working
across the value chain. The key participants involved in the second hand value chain included the
customers, dealers and the agents primarily. The current existing working models do not consider the
importance and the role of OEMs and Cummins (the manufacturing company).
Following are some of the key factors that are absent in the current second hand diesel generator
model:
Models currently working are highly unorganised and are being controlled only through dealers &
agents
Current involvement of Cummins, OEMs or any known brand (like Kirloskar) in this market in absent
Prices and Margins of second hand sales ( of the dealers & the agents) are not at all standardised
There is very little scope for value added services, warranties and other related services to be provided
to the customer since the churn of the Gensets is at the level of the dealers without involvement of
organised players ( like Cummins, Kirloskar etc.)
However, building a business model involving all the participants, keeping Cummins in mind can help
in developing a working model. Based on our research, we were able to come up to two possible
models that can exist in the current environment - Single Brand Model and Multi Brand Model.
Business
Models
Single Brand Multi Brand

Model Model
The division between each of the models have been made considering the number of brands that are
being sold in the market. Considering Gujarat Generators being a successful model in selling second
hand diesel generator sets, both the models could be quite attractive for Cummins. Following are the
briefs of each model followed by critical analysis of each of the models:
a) Single Brand Model: This is the model in which through the established second hand channel
Cummins will be able to sell only second hand Cummins DG sets. Considering the situation wherein
Cummins currently a very strong OEM and the dealer network, selling the same brand through
the existing model would be simpler. The biggest issue would be integrate the new concept with
the current OEMs (with which Cummins has a very serious, strong and important relationship) and
the dealers. These are the dealers which have been developed by the OEMs. The potential for this
model is great as we will discuss further. However, it is primarily constrained by the number of
Cummins second hand Diesel Generators present in the market.
b) Multi Brand Model: This model is quite similar to Mahindra First Choice. It talks about how
Cummins will be able to sell multi-brand products through the second hand market. In this model,
since Cummins needs to sell non-Cummins DG sets to the market, the participant dynamics
changes. Since it will be a pure market place model, the position of the OEMs changes and
Cummins relationship with the dealers becomes even more important. The potential for this
model is that it will give Cummins greater access to the second hand market and the dealers more
49
freedom to operate. However, in order to incorporate such a model, the company will have to
rethink its current strategy of operation and create a separate product line for second hand
market operations.
5.1 Model Analysis

In order to critically analyse all both the models, we have broken down each model in a number of
value chain activities to analyse the structure at each place. We have tried to understand who would
be carrying key operations at each point and how would the business generate money. We have tried
to incorporate the understanding that we got from the secondary research to fully understand the
entire structure. Through the interviews that we conducted of the key stakeholders, we have tried to
develop roles, responsibilities and benefit to each of the stakeholders in carrying out the operation
and develop a holistic understanding of the models. We have tried to analyse each of the two models
on the following parameters:
Market Participants & Roles

Material Flow
Channel
Reconditioning + Warranty + value Added Services
Business Development
Maintenance & Services
Pricing
Impact on Participants
5.2 Single Brand Model
As previously discussed, the Single Brand Model works on the objective that the entire operations and
the supply chain would be selling only the second hand DG sets of Cummins. Following is a pictorial
depiction of the key business process flows and process. Further analysis on the various parameters
is mentioned below:
a) Market Participants: Key market participants in this model are the dealers, OEMs, agents,
Cummins and the customers. Customers would include both the sellers and the buyers (second
hand) of the DG sets. Key responsibilities of each participant include:
50
i. OEMs: will be responsible to maintain the inventory database of second hand DG sets. As found
out during the study that 90% of the dealers and agents do not stock inventory. Therefore at times
the dealers do not have the required capacity to hold inventory. Under such cases OEMs can play
the role of holding inventory or at least maintain at database to facilitate future sale.
ii. Dealers: will be the key participants in this model. They will be involved in the direct procurement
of the DG sets. Dealer network will be the current existing network that Cummins has of its OEMs.
This network will be directly tapped to establish the business. They will be the key persons
involved in the sourcing, servicing and procurement of the DG sets
iii. Agents: will be the people who will be responsible for lead generation. They will act like match
makers and facilitate the sales process and the required logistics for the entire process.
iv. Sellers: will the market participants whom agents will bring on board. They will be the people who
will be selling the second hand DG set to the dealers. They can be past users who are using the
buyback model to sell the product back into the market for an exchange or people who only are
selling the DG set for money. They will be responsible to provide the necessary details of DG sets.
v. Customer: would be the second hand diesel generator customer. Based on the extensive analysis
we did through the in-depth interviews we can say that he would be a low KVA user mainly buying
second hand DG set because of price sensitivity. He will
vi. Cummins: will play the role of an overall facilitator. Other roles for Cummins would include brand
development, category development, spare parts, creation of online portal (only for information).
Cummins will have to oversee the process of warranty standardisation and build in a successful
model for implementation.
b) Material Flow: Material flow of the DG sets is covered under the following headings:
i) Procurement: Procurement of the DG set is done at the dealers end. Procurement can be done
through four mediums - through buy-back model, from other dealers, through OEMs and through
personal clients. Buy-back is a model in which the old DG set of a customer is bought back when
he is making a purchase for a new DG set. This model can completely focus on the buy-back model.
This will help in creating connect with the customers even when the warranty ends. Thus, the
customer can be sold a new DG set in exchange of an old one which will be used for the second
51
hand market. Apart from that, sourcing can take place from other dealers, through personal
clients and through clients of the OEMs.
Procurement
(Mediums)
BuyBack Direct OEM Other Dealer/

Model Customers Network Agents
ii) Inventory: is kept based on the side of the dealership. Usually 90% of the dealers only act as agents
and collect the commission. Very few dealers have the space to maintain inventory at their locations.
As a result, stock decision should be taken. If the facility is available, the inventory holding problem
can be resolved by the OEMs. OEMs can provide a common area for the storage of the DG sets for a
particular region.
iii) Logistics: Logistics responsibilities and costs would be borne by the party as written in the contract.
Depending on the situation, either the dealer or the seller has to bear the cost. Logistics cost is
accordingly incorporated in the final price of the DG set.
c) Channel: As mentioned in the business process, both the buyer and the seller channels include
the similar agents. Either the sale happens through the direct contact between the customer and
the dealer or through agents. These agents do the work of matchmaking in both the cases buyer
and dealer & seller and dealer. Agents get a commission on the price of the DG set. This
commission is in the rage of 3-5%. The third medium for channel interaction is through online
websites. A new online portal can be created by Cummins to maintain a database of product
inventory information at each dealership. This will help the customer search for required DG set
and also help Cummins in finding DG sets when inventory is not available.
d) Reconditioning + Warranty + Value Added Services: Usually the customers do not ask for
reconditioning and neither is reconditioning done on second hand products. However, as per
requirements, it is carried out. Dealers do not hold the capability to carry out the reconditioning
exercise. This is done at the site of the Service Dealer only. Therefore, if reconditioning is needed,
logistics to the service dealer and back has to be managed. Apart from that, basic servicing will be
done to all the DG sets before sale. Proper service capabilities will have to be developed at the
site of the dealers. This capability will be certified by Cummins and accordingly a set Cummins
warranty will be sold to the customer. The Warranty and AMC contracts will be the medium
through which the company will make money.
e) Business Development: Responsibility of Business Development and strategic decision making will
solely be in the hands of Cummins. Cummins will act as the chief change agent and drive the OEM
and the dealers to work upon the proposed model.
f) Maintenance & Services: Dealers will be responsible for the maintenance and service activities
that needs to be carried out. These activities will also include the after sales service that will be
provided. At a local level, in order to maintain relationship, the dealers can also provide some
more lucrative value added services. However at the global level Cummins will only make note of
activities and will not be directly involved in all these activities.
52
g) Pricing: As discussed with the dealers during primary research, it was evident that the margins
dealers make depend on a lot of factors and could be anything above 10%. This was due to
bargaining power of the dealer, who is the seller. Usually, customers do not care much about the
cost as long as the DG set is nearly 30-40% cheaper than the first hand rates. Apart from margin,
the costs to calculate the landing cost of the DG set involves the follows:
i. Cost of the used DG set

ii. Logistics and transportation cost
iii. Quality check cost
iv. Warranty cost
v. Commission to the agents and the entire value chain
vi. Selling & administrative costs
Margin is added over and above all these cost to arrive at the final value
h) Impact on Participants
i. Cummins: Currently Cummins faces two big problems which this model will try to solve. One
problem is that, once the warranty lapses after six years on any of its products, Cummins loses the
connect with the customers. Typically, after the sixth year, Cummins has no idea of what happens
to the customer. Second problem is that in the low KVA segment, Cummins has a smaller market
share due to which the number of DG sets it sells is less. However, the churn of usage in the low
KVA segment is very high. Therefore this model will help create a brand visibility in the lower KVA
segment and create a special connect with customers by launching this new product line of second
hand DG sets. Moreover, buyback models of procurement will also help in developing Cummins
customer relationship. This model will provide an increased customer base, increased customer
connect and brand visibility. Apart from that Cummins spare parts will be used during servicing
and Cummins warranties be sold in the second market also due to which the presence of Cummins
in the market will increase many fold.
ii. OEMs: OEMs also have a very major role to play in the entire setup. They will be the sole entities
responsible to handle the entire dealer network. Ideally the OEMs will facilitate the model through
two means. The first medium being by providing their entire dealer network to Cummins to set
up the second hand model. The entire business will be drive by their network and their
involvement to bring dealers on board will be important. Apart from that OEMs are also in large
part responsible to maintain a database of the DG set availability. Since the dealers belongs to
Cummins, it can maintain the inventory levels of the DG sets in the database so that DG sets can
be appropriately sent as per when demand comes.
iii. Dealers: For the dealers, this model is a big business opportunity. They will be the key personnel
responsible to carry out the entire process. They will be responsible to build a strong customer
base and customer connect. Moreover through this medium, their relationship with Cummins will
also improve once they start giving warranties and start doing servicing especially for Cummins. It
will be great proposal for the dealers to sell second hand branded DG Gensets in the market
considerably making a lot of margin.
iv. Customers: Effect on the customers would be great. Due to extra benefits through lower price DG
sets, DG sets with warranty, value added services, better connect with Cummins and an efficient
53
model. Customer would benefit. Usually the customer base that buys the DG sets has a big
problem of maintenance and warranty while buying a new DG set. People do not go for second
hand DG set even though they are cheap because actual cost realisation is more due to more
money spent on servicing and maintenance. This extra cost can be minimised by providing
warranties and better timely services. This is what Cummins will be able to achieve if this model
starts functioning successful. Therefore for the customer he will have the following benefits:
New and organised (branded) venue for purchase and sale of DG sets
Increase connect with Cummins and trust on the second hand DG set that is being bought
Price benefit to the tune of 30-40% along with certified warranty, quality assurance and
warranty provisions
5.3 Multi Brand Franchisee Model

As mentioned earlier, the multi brand model will be minimally different from the original single brand
model. In this model, the dealer network would work as a franchisee with Cummins and accordingly
act to develop the second hand model. Here, the relationship between Cummins and the dealers
becomes even more important because the dealers are the ones who will be carrying out the
important last mile operations.
Due to the presence of the franchisee network, the entire system would change from how it operated
in the first model. However, the role of the OEMs and Cummins would more or less remain the same
business development.
Analysis of the model on various parameters:
a) Market Participants: The key market participants involved in this model would be Cummins,
Dealers, second hand DG genset buyer and seller and the channel partners. The only difference
would be due to the franchise network the relationship between the dealer and Cummins will
become even more important.
i. Cummins: It will play the role of an overall facilitator similar to first hand model. Other roles
for Cummins would include brand development, category development, spare parts, creation
of online portal (only for information). Cummins will have to oversee the process of warranty
54
standardisation and build a successful model for implementation. The relationship in this case
between Cummins and dealers would become very important. Dealers will interact through a
franchisee network therefore their relationship will become more important. Dealers will be
charged a fee for franchisee by Cummins.
ii. OEMs: They will be responsible to maintain the inventory database of second hand DG sets
with the dealers. Since the dealers will be directly involved with Cummins therefore the role
of OEMs will come down. As found out during the study that 90% of the dealers and agents
do not stock inventory. Therefore at times, the dealers do not have the required capacity to
hold inventory. Under such cases OEMs can play the role of holding inventory or at least
maintain database to facilitate future sale.
iii. Dealers: They will be the key participants in this model. They will be involved in the direct
procurement of the DG sets. Dealer network will be the current existing network that
Cummins has of its OEMs. This network will be directly tapped to establish the business. They
will be the key persons involved in the sourcing, servicing and sale of the DG sets
iv. Agents: will be the people who will be responsible for lead generation. They will act like match
makers and facilitate the sales process and the required logistics for the entire process.
v. Sellers: will the market participants whom agents will bring on board. They will be the people
who will be selling the second hand DG set to the dealers. They can be past users who are
using the buy-back model to sell the product back into the market for an exchange or people
who are only selling the DG set for money. They will be responsible to provide the necessary
details of DG sets.
vi. Customer: would be the second hand diesel generator buyer. Based on the extensive analysis
we did through the in-depth interviews, we can say that he would be mainly buying second
hand DG set because of price sensitivity.
b) Material Flow: of the DG sets will be very much similar as before. It will be covered under
procurement, inventory management and logistics.
i. Procurement: of the DG set is done at the end of dealer. Procurement can be done through
four mediums. They are through buy back model, from other dealers, through OEMs and
through personal clients. Buy back is a model in which the old Gensets of a customer is bought
back when he/she is making a purchase for a new DG set. This model can completely focus on
the buyback model. This will help in creating connect with the customers even when the
warranty ends. Thus, the customer can be sold a new DG set in exchange of an old one which
will be used for the second hand market.
ii. Inventory: is maintained based on the size of the dealership. Usually 90% of the dealers only
act as agents and collect the commission. Very few dealers have the space to maintain
inventory at their locations. As a result stock decision should be wisely made.
55
iii. Logistics: Logistics responsibilities and costs would be borne by the person as written in the
contract. Depending on the situation, either the dealer or the seller has to bear the cost.
Logistics cost is accordingly incorporated in the final price of the DG set.
c) Channel: As mentioned in the business process, both the buyer and the seller channels include
the similar agents. Either the sale happens through the direct contact between the customer and
the dealer or through agents. These agents do the work of matchmaking in both the cases buyer
and dealer & seller and dealer. Agents get a commission on the price of the DG set. This
commission is in the range of 2-5%. The third medium for channel interaction is through online
websites. A new online portal can be created by Cummins to maintain a database of product
inventory information at each dealership. This will help them in finding DG sets when inventory is
not available.
d) Reconditioning + Warranty + Value Added Services: Usually the customers do not ask for
reconditioning and neither is reconditioning done on second hand products. However as per
requirements it is carried out. Dealers do not hold the capability to carry out the reconditioning
exercise. This is done at the site of the Service Dealer only. Therefore, if reconditioning is needed,
logistics to the service dealer and back has to be managed. Apart from that, basic servicing will be
done to all the DG sets before sale. Proper service capabilities will have to be developed at the
site of the dealers. This capability will be certified by Cummins and accordingly a set Cummins
warranty will be sold to the customer. The DG sets Warranty and AMC contracts will be modes
through which the company will make money.
e) Business Development: Responsibility of Business Development and strategic decision making will
solely be in the hands of Cummins. Cummins will act as the chief change agent and drive the OEM
and the dealers to work upon the proposed model.
Cummins
56
f) Maintenance & Services: Dealers will be responsible for the maintenance and service activities
that will be carried out. These activities will also include the after sales service that will be
provided. At a local level, in order to maintain relationship the dealers can also provide some more
lucrative value added services. However, at the global level Cummins will only make note of
activities and will not be directly involved in all these activities.
g) Pricing: As discussed with the dealers during the primary research, it was evident that the margins
dealers make depend on a lot of factors and could be anything in the range and above 10%. This
was due to bargaining power of the seller i.e. the dealer. Usually, customers do not care much
about the cost as long as the DG set is nearly 30-40% cheaper than the first hand DG sets rates.
Apart from margin, the costs to calculate the landing cost of the DG set is calculated are as follows:
i. Cost of the used DG set

ii. Logistics and transportation cost
iii. Quality check cost
iv. Warranty cost
v. Commission to the agents and the entire value chain
vi. Selling & administrative costs
Margin is added over and above all these costs to arrive at the final sales price.
h) Impact on Participants
i. Cummins: Currently Cummins faces two big problems which this model will try to solve. One
problem is that once the warranty lapses after six years on any of its products, Cummins loses
the connect with the customers. Typically, after the sixth year, Cummins has no idea of what
happens to the customer. Second problem is that in the low KVA segment, Cummins has a
smaller market share due to which the number of DG sets it sells is less. However, the churn
of usage in the low KVA segment is very high. Therefore this model will help create a brand
visibility in the lower KVA segment and create a special connect with customers by launching
this new product line of second hand DG sets. Moreover, buyback models of procurement will
also help in developing Cummins customer relationship. This model will provide an increased
customer base, increased customer connect and brand visibility. Apart from that Cummins
spare parts will be used during servicing and Cummins warranties be sold in the second market
also due to which the presence of Cummins in the market will increase many fold. However,
since Cummins will also be selling other brands in the market this business model also will
cannibalize the market to some extent. Cummins will have to develop the capabilities to sell
such kind of DG sets which it previously never has.
ii. OEMs: OEMs will have a very specific role to play in this business model. They will not be
directly controlling the dealership network. On the other hand, they will look after integrating
the network through maintaining the database of available DG sets and helping in lead
generation when required. OEMs will also use its capabilities to help build an environment of
integration amongst all the dealers.
iii. Dealers: For the dealers, this model is a big business opportunity. They will be the key
personnel responsible to carry out the entire process. They will be responsible to build a
strong customer base and customer connect. Moreover, through this medium, their
relationship with Cummins will also improve once they start giving warranties and start doing
57
servicing especially for Cummins. It will be great proposal for the dealers to sell second hand
branded DG sets in the market considerably making a lot of margin. Dealers will be able to get
closer and build a more integrated business model with Cummins. The franchisee network will
also help in strengthening the dealer-dealer relationship. Since at some point of time dealers
will have to refer to each other and hence will lead to better integration at the dealer level.
v. Customers: Effect on the customers would be great. Due to extra benefits through lower price
DG sets, DG sets with warranty, value added services, better connect with Cummins and an
efficient model. Customer would benefit. Usually the customer base that buys the DG sets has
a big problem of maintenance and warranty while buying a new DG set. People do not go for
second hand DG set even though they are cheap because actual cost realisation is more due
to more money spent on servicing and maintenance. This extra cost can be minimised by
providing warranties and better timely services. This is what Cummins will be able to achieve
if this model starts functioning successful. Therefore for the customer he will have the
following benefits:
New and organised (branded) venue for purchase and sale of DG sets
Increase connect with Cummins and trust on the second hand DG set that is being
bought
Price benefit to the tune of 30-40% along with certified warranty, quality assurance
and warranty provisions
58
Learnings from the Project
The diesel generator set industry is quite a niche industry which doesnt have much mainstream
reference and was hence was relatively new to us. Moreover, as students, we have mostly been
exposed to the world of B2C marketing and hence, this project gave us a good practical multi-
dimensional exposure to B2B segment of marketing. The most important learning for us, in our
opinion, was understanding the intricacies involved in carrying out a detailed research in a B2B
environment involving multiple stakeholders from different professional backgrounds and having
different educational levels and need to cross-validate the outcomes before its acceptance in
development of any model.
Multiple periodic discussions with company personnel imparted detailed industry and business
knowledge provided a good base for our further study. We then performed our own study about the
industry, market dynamics and operating model of the organization under study. Something unique
to this industry and new to us was multiple ways of segmenting the customers. Presentation of our
secondary research to company personnel revealed potential inaccuracies in research methodologies
of research agencies and helped us understand the need to critically analyze them and not accept the
analyses at face value.
While working on this project we realized that although the industry is well organized with low
fragmentation for new DG sets, but when it comes to second hand DG sets, it is highly unorganized
and fragmented with small players having little/no sophistication controlling the market. Hence
obtaining data at this level proved to be a challenge as there was no record made by most of the
stakeholders. Moreover, these target respondents were apprehensive and elusive when we
approached them for interviews and trying to convince them oblige was difficult and proved to be a
new learning experience for us. We had to contact them multiple times through various channels in
order to elicit a response from them. We sometimes also had to change our identities and roles for
the same pose as research students from IIT or project interns with Cummins or even customers.
Work on the primary research work reinstated the importance of approaching it with an open mind
and need to keep your own intuition not affect the study and outcome. Moreover, it taught us the
need to be flexible with the research instruments and re-design it (if required) based on initial
responses for improved results.
A lot of time and patience was required for collection of online 2nd hand DG set listing data and while
drawing insights from the same we learnt the importance of cleaning and standardization of data in
order to generate accurate results.
The major challenge (and hence a learning opportunity) that we faced was data collection in the B2B
scenario, specifically when it comes to sharing of business data with the researchers. We were
questioned a lot on our backgrounds and motives and in most cases asked to produce official
documentation in order to get a response from the target respondents.
59
Limitations
1. Not being an integral part of Cummins PGBU ecosystem prevented us from developing an in-
depth validated business model proposal.
2. Lack of relevant and supporting contacts of customers and dealers from varied industries and
geographies inhibited us from performing a comprehensive research.
3. Inaccurate data collection by the OEMs of Cummins (as reflected in shared CRM data) also
turned out to be a hurdle in the analysis.
4. Time constraint didnt allow us to contact service dealers in order to gain insights on the
proposed business models.
5. Non-maintenance of records of 2nd hand DG set sales transactions limited our information and
forced us to rely on memory-based inputs from dealers and agents.
The understanding of the market by the studied customers and some of the dealers (those having
listings on OLX) was low which was reflected in the nature of their responses and data provided by
them.
60
Appendix
1. Table 1: CRM Data from Cummins
Cummins provided us with the CRM data of one of its OEMs which tracks the following data for each
of its queries:
Enquiry No: A unique code given to each incoming request/query

Enquiry Date: Date of enquiry made by the prospect. Company started tracking its CRM data
post May 2013. So, we dont have any data points prior to that
Industry: Industry to which the prospects belongs to. For e.g. reality, infra, manufacturing,
education etc.
KVA Rating: KVA Rating of the required product in case the customer is well informed
L-M-H HP: Low/Medium/High power rating of the required product
Quantity Requested: Number of diesel generators required by the client
Model: Model number from the Catalogue/Cummins website
Series: Series of the model requested. For e.g. X Series, B Series, N Series etc.
Financing Requested: Yes, if the prospect asked for any financial help
Reporting Month-Year: Reporting to Cummins office about the enquiry
Sales Stage: Customer can belong to any of the four mentioned stages which are as follows:
o Known Universe: When the customer is not sure about the product and need may
arise in near future but the time and requirement are still unknown
o Marketing Platform: Pre-sales and sales team start the actual negotiation
o Working Platform: The deal is almost frozen at this stage with price, requirements and
other conditions
o Buying Platform: When the payment of 1st advance is made by the customer
Win-Loss Outcome: Final outcome of the entire process. It can be lead lost, lead dropped or
termination request in case of loss sales
Reason for Loss: Reasons like budgetary constraints, price issues or purchase of second hand
DGs are mentioned by the leads
Enquiry Source: List of direct and indirect sources of the request
S.No Enquiry No Enquiry Date Industry KVA Rating L-M-H Quantity Requested
HP
106 MKT/00209 20-May-13 Education 82.5 LHP 1
123 MKT/00217 20-May-13 Infra 125 LHP 1
130 MKT/00742 29-May-13 Reality 25 LHP 1
194 MKT/00550 26-May-13 Mobile Power 20 LHP 2
197 MKT/00968 01-Jun-13 Manufacturing 25 LHP 1
310 MKT/00460 25-May-13 Manufacturing 500 MHP 1
313 MKT/00381 24-May-13 Rental 15 LHP 1
318 MKT/01396 07-Jun-13 Retail 15 LHP 1
345 MKT/01477 10-Jun-13 Media 250 MHP 1
358 MKT/00190 18-May-13 HealthCare 25 LHP 1
363 MKT/00681 29-May-13 Pharma 30 LHP 1
61
373 MKT/01043 03-Jun-13 Reality 15 LHP 1
376 MKT/01361 07-Jun-13 Reality 62.5 LHP 1
384 MKT/01203 05-Jun-13 Education 15 LHP 1
391 MKT/00595 27-May-13 Manufacturing 50 LHP 1
451 MKT/00067 10-May-13 Manufacturing 62.5 LHP 1
456 MKT/00670 28-May-13 Hospitality 35 LHP 1
492 MKT/01424 08-Jun-13 Manufacturing 250 MHP 1
494 MKT/00922 01-Jun-13 Agro & Aqua 25 LHP 2
503 MKT/00499 25-May-13 HealthCare 15 LHP 1
510 MKT/00696 29-May-13 Manufacturing 40 LHP 1
579 MKT/00078 12-May-13 Infra 320 MHP 1
Model Series Financing Requested Reporting Month-Year Sales Stage

6BT-5.9-G1 B series May-13 Working Platform
6BTAA-5.9-G3 B series May-13 Working Platform
X2.5-G2 X series Jun-13 Working Platform
X2.5-G2 X series Jun-13 Buying Platform
X2.5-G2 X series Jun-13 Market Platform
KTA-19-G9 K series Jun-13 Market Platform
6CTAA-8.3-G4 C series Jun-13 Working Platform
S3.8-G3 S series Jun-13 Market Platform
6BTAA-5.9-G3 B series Jun-13 Market Platform
S3.8-G7 S series Jun-13 Working Platform
6CTAA-8.3-G4 C series Jun-13 Working Platform
X1.7-G1 X series Jul-13 Market Platform
S3.8-G4 S series Jul-13 Market Platform
6BTAA-5.9-G3 B series Jul-13 Buying Platform
X1.7-G1 X series Jul-13 Working Platform
NTA-855-G2-I N series Jul-13 Working Platform
62
Win-Loss Outcome Reason for Loss Enquiry Source
Lead Dropped Budgetary Constrains Employee Reference(Sandeep Bhardwaj )
Lead Dropped Bought II nd Hand Tele/Cold Calling
Termination Request Bought II nd Hand User Reference(Good bakery, Lucknow )
Lead Dropped Budgetary Constrains Direct (Inbound Call)
Lead Lost Price Dealer Reference(lakra generator)
Lead Lost Price Direct (Inbound Call)
Lead Lost Price Third Party Reference(pryas hospital)
Lead Lost Price Dealer Reference(keshri & company)
Lead Lost Price Dealer Reference(keshri & company)
Lead Dropped Budgetary Constrains Jakson Website
Lead Dropped Bought II nd Hand Tele/Cold Calling
Lead Lost Price Google Web
Lead Lost Price Tele/Cold Calling
Lead Lost Price Tele/Cold Calling
Termination Request Budgetary Constrains User Reference(Dr.Vivek Dwivedi)
Lead Dropped Budgetary Constrains Direct (Inbound Call)
Lead Lost Price Jakson Website
Lead Dropped Budgetary Constrains Principle(Cummins)(Bhanu Gupta)
Termination Request Budgetary Constrains Jakson Website
Lead Dropped Budgetary Constrains Existing Customer
Termination Request Budgetary Constrains User Reference(RSPL Ltd)
Termination Request Budgetary Constrains Tele/Cold Calling
Lead Lost Price Third Party Reference
Termination Request Budgetary Constrains Existing Customer
Termination Request Budgetary Constrains User Reference
Termination Request Budgetary Constrains User Reference
63
2. Table 2: OLX Data
Company Capacity City State Price
Kirloskar 30 KVA Delhi Delhi 1,75,000
Ashok Leyland 110 KVA Hyderabad Telangana 3,75,000
Volvo Eicher 15 KVA Madurai Tamil Nadu 2,10,000
Cummins 500 KVA Vapi Gujarat 19,00,000
Kirloskar 30 KVA Belgaum Karnataka 1,10,000
Kirloskar 30 KVA Chennai Tamil Nadu 1,35,000
Kirloskar 7.5 KVA Kottayam Kerala 60,000
Kirloskar 200 KVA Coimbatore Tamil Nadu 7,00,000
Kirloskar 5 KVA Bapatla Andhra Pradesh 1,10,000
Ashok Leyland 15 KVA Tiruppur Tamil Nadu 1,50,000
Kirloskar 7.5 KVA Bengaluru Karnataka 1,15,000
Kirloskar 62.5 KVA Jaipur Rajasthan 2,20,000
Kirloskar 125 KVA Jaipur Rajasthan 8,00,000
Ashok Leyland 62.5 KVA Hyderabad Telangana 3,75,000
Ashok Leyland 100 KVA Coimbatore Tamil Nadu 3,30,000
Cummins 250 KVA Erode Tamil Nadu 7,75,000
Non-Brand 15 KVA Patiala Punjab 55,000
Non-Brand 20 KVA Mumbai Maharashtra 59,000
Kirloskar 15 KVA Mumbai Maharashtra 49,000
Non-Brand 18 KVA Allahabad Uttar Pradesh 95,000
Non-Brand 20 KVA Lucknow Uttar Pradesh 95,000
Cummins 15 KVA Nashik Maharashtra 2,80,000
Automech 7.5 KVA Puducherry Pondicherry 1,10,000
Mahindra Powerol 50 KVA Bengaluru Karnataka 3,40,000
Escorts 10 KVA Noida Uttar Pradesh 2,10,000
Mahindra Powerol 15 KVA Muzaffarnagar Uttar Pradesh 75,000
Mahindra Powerol 20 KVA Muzaffarnagar Uttar Pradesh 1,20,000
Cummins 125 KVA Navi Mumbai Maharashtra 6,25,000
Cummins 250 KVA Indore Madhya Pradesh 8,00,000
Kirloskar 7.5 KVA Ludhiana Punjab 40,000
Non-Brand 20 KVA Hyderabad Telangana 75,000
Non-Brand 20 KVA Bengaluru Karnataka 80,000
Kirloskar 15 KVA Hyderabad Telangana 1,30,000
Kirloskar 7.5 KVA Erode Tamil Nadu 46,000
Cummins 125 KVA Thiruvananthapuram Kerala 1,85,000
Kirloskar 125 KVA Ludhiana Punjab 2,25,000
Non-Brand 65 KVA Narnaul Haryana 1,80,000
Caterpillar 320 KVA Bhavnagar Gujarat 6,80,000
Kirloskar 20 KVA Nanded Maharashtra 2,20,000
Kirloskar 25 KVA Faridabad Haryana 99,000
Kirloskar 20 KVA Vellore Tamil Nadu 2,00,000
Cummins 125 KVA Delhi Delhi 6,15,000
Mahindra Powerol 30 KVA Coimbatore Tamil Nadu 2,50,000
Kirloskar 15 KVA Delhi Delhi 37,000
Kirloskar 50 KVA Gurgaon Haryana 1,75,000
Non-Brand 10 KVA Ludhiana Punjab 75,000
Crompton Greaves 125 KVA Bengaluru Karnataka 4,80,000
Non-Brand 20 KVA Vadodara Gujarat 85,000
Cummins 25 KVA Coimbatore Tamil Nadu 2,30,000
64
Kirloskar 7.5 KVA Udupi Karnataka 69,000
Ashok Leyland 62.5 KVA Jalandhar Punjab 1,85,000
Kirloskar 15 KVA Nalasapora Maharashtra 1,50,000
Cummins 25 KVA Pune Maharashtra 2,25,000
Crompton Greaves 20 KVA Coimbatore Tamil Nadu 80,000
Volvo Eicher 5 KVA Noida Uttar Pradesh 2,00,000
Non-Brand 50 KVA Khurja Uttar Pradesh 3,00,000
Ashok Leyland 75 KVA Chopda Maharashtra 1,50,000
Cummins 15 KVA Pimpri Maharashtra 1,55,000
Ashok Leyland 20 KVA Bhavnagar Gujarat 1,35,000
Ashok Leyland 82.5 KVA Bhavnagar Gujarat 1,90,000
Kirloskar 15 KVA Rajahmundry Andhra Pradesh 1,00,000
Kirloskar 125 KVA Bhavnagar Gujarat 4,50,000
Kirloskar 10 KVA Coimbatore Tamil Nadu 75,000
Ashok Leyland 35 KVA Surat Gujarat 3,50,000
Ashok Leyland 62.5 KVA Jaipur Rajasthan 1,75,000
Ashok Leyland 15 KVA Kolkata West Bengal 1,30,000
Ashok Leyland 15 KVA Noida Uttar Pradesh 1,82,000
Ashok Leyland 75 KVA Chopda Maharashtra 1,50,000
Birla Yamaha 25 KVA Agra Uttar Pradesh 1,65,000
Caterpillar 750 KVA Hyderabad Telangana 25,50,000
Caterpillar 1750 KVA Ghaziabad Uttar Pradesh 30,00,000
Caterpillar 380 KVA Delhi Delhi 10,00,000
Caterpillar 380 KVA Ambattur Tamil Nadu 6,85,000
Caterpillar 88 KVA Mumbai Maharashtra 53,000
Caterpillar 40 KVA Coimbatore Tamil Nadu 3,00,000
Crompton Greaves 5 KVA Aligarh Uttar Pradesh 5,50,000
Crompton Greaves 15 KVA Warangal Telangana 56,000
Crompton Greaves 62.5 KVA Nagpur Maharashtra 3,50,000
Crompton Greaves 20 KVA LB Nagar Telangana 95,000
Crompton Greaves 15 KVA Hyderabad Telangana 98,000
Crown 7.5 KVA Chennai Tamil Nadu 40,000
Crown 10 KVA Mumbai Maharashtra 50,000
Cummins 40 KVA Noida Uttar Pradesh 2,50,000
Cummins 125 KVA Gurgaon Uttar Pradesh 4,75,000
Cummins 15 KVA Moradabad Uttar Pradesh 2,25,000
Cummins 140 KVA Bahadurgarh Haryana 2,00,000
Cummins 25 KVA Chennai Tamil Nadu 1,75,000
Cummins 15 KVA Pimpri Maharashtra 1,55,000
Cummins 40 KVA Hyderabad Telangana 2,65,000
Cummins 25 KVA Asansol West Bengal 2,60,000
Cummins 125 KVA Asansol West Bengal 5,50,000
Cummins 380 KVA Agra Uttar Pradesh 20,00,000
Cummins 160 KVA Vijaywada Andhra Pradesh 4,00,000
Cummins 100 KVA Kolhapur Maharashtra 2,50,000
Cummins 25 KVA Faridabad Haryana 1,65,000
Cummins 500 KVA Dehradun Uttaranchal 20,50,000
Cummins 30 KVA Lucknow Uttar Pradesh 1,50,000
65
Cummins 25 KVA Mumbai Maharashtra 2,25,000
Cummins 125 KVA Bangalore Karnataka 6,00,000
Cummins 500 KVA Vapi Gujarat 19,00,000
Cummins 250 KVA Erode Tamil Nadu 7,75,000
Cummins 500 KVA Kurukshetra Haryana 11,00,000
Cummins 160 KVA Bangalore Karnataka 4,00,000
Cummins 65 KVA Amritsar Punjab 4,50,000
Cummins 125 KVA Trivandrum Kerala 1,85,000
Volvo Eicher 40 KVA Palwal Haryana 2,95,000
Volvo Eicher 40 KVA Ludhiana Punjab 2,00,000
Kirloskar 35 KVA Bengaluru Karnataka 1,65,000
Kirloskar 7.5 KVA Coimbatore Tamil Nadu 85,000
Kirloskar 14 KVA Amritsar Punjab 39,000
Kirloskar 125 KVA Tirupati Andhra Pradesh 2,00,000
Kirloskar 10 KVA Bolpur West Bengal 55,000
Kirloskar 15 KVA Kochi Kerala 1,00,000
Kirloskar 30 KVA Hassan Karnataka 1,70,000
Kirloskar 50 KVA Bangalore Karnataka 1,90,000
Kirloskar 15 KVA Erode Tamil Nadu 90,000
Kirloskar 7.5 KVA Erode Tamil Nadu 70,000
Kirloskar 200 KVA Jabalpur Madhya Pradesh 2,75,000
Kirloskar 100 KVA Trivendrum Kerala 5,00,000
Kirloskar 75 KVA Ratlam Madhya Pradesh 2,40,000
Kirloskar 5 KVA Mangalore Karnataka 45,000
Kirloskar 30 KVA Pune Maharashtra 1,95,000
Kirloskar 20 KVA Vapi Gujarat 2,40,000
Kirloskar 30 KVA Noida Uttar Pradesh 1,70,000
Kirloskar 200 KVA Amritsar Punjab 3,50,000
Kirloskar 20 KVA Erode Tamil Nadu 1,75,000
Kirloskar 82.5 KVA Madurai Tamil Nadu 4,50,000
Kirloskar 62.5 KVA Gurgaon Haryana 1,40,000
Kirloskar 62.5 KVA Coimbatore Tamil Nadu 4,50,000
Kirloskar 10 KVA Kakinada Andhra Pradesh 65,000
Mahindra Powerol 10 KVA Jaipur Rajasthan 1,00,000
66
Mahindra Powerol 40 KVA Kochi Kerala 2,80,000
Mahindra Powerol 15 KVA Ludhiana Punjab 1,25,000
Mahindra Powerol 30 KVA Lucknow Uttar Pradesh 2,00,000
Non-Brand 7.5 KVA Kottayam Kerala 70,000
Non-Brand 4 KVA Batala Punjab 23,000
Non-Brand 15 KVA Gurgaon Haryana 20,000
Non-Brand 5 KVA Bangalore Karnataka 81,000
Non-Brand 16 KVA Bengaluru Karnataka 65,000
Non-Brand 15 KVA Chennai Tamil Nadu 85,000
Non-Brand 7.5 KVA Delhi Delhi 32,000
Non-Brand 20 KVA Vadodara Gujarat 85,000
Non-Brand 6.5 KVA Nirmal Telangana 70,000
Non-Brand 17.5 KVA Mysore Karnataka 65,000
Non-Brand 7.5 KVA Tiruveneli Tamil Nadu 45,000
Tata 30 KVA Lucknow Uttar Pradesh 1,40,000
Tata 30 KVA Ludhiana Punjab 1,21,000
Tata 40 KVA Hoshiarpur Punjab 1,50,000
Tata 82.5 KVA Kolkata West Bengal 3,50,000
Volvo Eicher 500 KVA Panipat Haryana 19,00,000
Kohler 5 KVA Ahmedabad Gujarat 1,70,000
Cummins 15 KVA Ranchi Jharkhand 3,50,000
Kirloskar 10 KVA Bankura West Bengal 65,500
Kirloskar 250 KVA Chandigarh Punjab 4,85,000
Kirloskar 10 KVA Mangalore Karnataka 90,000
Cummins 180 KVA Bengaluru Karnataka 4,00,000
Non-Brand 7.5 KVA Ludhiana Punjab 28,000
Tata 82.5 KVA Hyderabad Telangana 4,23,000
Crompton Greaves 250 KVA Guntur Andhra Pradesh 7,00,000
Cummins 315 KVA Mumbai Maharashtra 10,00,000
Non-Brand 15 KVA Indore Madhya Pradesh 50,000
Mahindra Powerol 30 KVA Hyderabad Telangana 2,70,000
Cummins 200 KVA Visakhpatnam Andhra Pradesh 8,50,000
Mahindra Powerol 160 KVA Khammam Telangana 6,25,000
Tata 30 KVA Bhavnagar Gujarat 1,20,000
Cummins 180 KVA Bhavnagar Gujarat 3,25,000
Cummins 380 KVA Bhavnagar Gujarat 6,70,000
Mahindra Powerol 25 KVA Bagalkot Karnataka 2,25,000
Non-Brand 25 KVA Madurai Tamil Nadu 1,35,000
Non-Brand 62 KVA Hyderabad Telangana 2,10,000
Mahindra Powerol 10 KVA Palwal Haryana 1,50,000
Kirloskar 25 KVA Faridabad Haryana 99,000
Cummins 125 KVA Ahmedabad Gujarat 2,50,000
Cummins 62.5 KVA Coimbatore Tamil Nadu 3,80,000
Kirloskar 5 KVA Chennai Tamil Nadu 25,000
Volvo Eicher 15 KVA Madurai Tamil Nadu 2,10,000
67
Kirloskar 30 KVA Chennai Tamil Nadu 1,35,000
Kirloskar 7.5 KVA Kottayam Kerala 60,000
Mahindra Powerol 10 KVA Gurgaon Haryana 70,000
Kirloskar 62.5 KVA Jaipur Rajasthan 2,20,000
Kirloskar 10 KVA Sangli Maharashtra 85,250
Kirloskar 30 KVA Noida Uttar Pradesh 1,70,000
Cummins 125 KVA Bengaluru Karnataka 6,00,000
Kirloskar 62.5 KVA Chennai Tamil Nadu 1,50,000
Ashok Leyland 62.5 KVA Delhi Delhi 1,50,000
Crompton Greaves 15 KVA Hyderabad Telangana 98,000
Kirloskar 62.5 KVA Gurgaon Haryana 1,40,000
Non-Brand 75 KVA Guntur Andhra Pradesh 2,45,000
Kirloskar 30 KVA Hassan Karnataka 1,70,000
Ashok Leyland 15 KVA Noida Uttar Pradesh 1,82,000
Kirloskar 20 KVA Erode Tamil Nadu 1,75,000
Crompton Greaves 285 KVA Pimpri Maharashtra 2,50,000
68
3. Table 3 Summary of Dealer Interviews
Parameters Dealer Solapur Dealer Kolhapur Dealer Epitome
Dealership Samarth Diesel Electric Services ( Shri Tech Engineers- Mr Venkatesh Bhatt Raj Kumar Saini (Epitome 8793266937)
Mr S S Shukla 9822037140 (Kolhapur) 9372048289
Solapur)
Customer Customers belong to Pan India Customer looks at - price, dealer reputation/ Customer first looks at price then at the brand.
Profiles / with specific KVA requirements. relationship, condition, running hours. 2nd hand Kirloskar and Cummins are similar in quality,
Decision Making They look at 1) price 2) number of DG set is primarily chosen by the customer service warranty. Cummins is however 7-15%
Criteria running hours 3) current condition because of cheaper price points. costly than Kirloskar in all KVA ratings.
then probable 4) brand Therefore some times in the first hand products
decision is made in favor of Cummins.
Online Presence
Dealership Cummins Dealership in Tier 3 Tier 3 (Kolhapur) City The Dealer owns a dealership in Tier 1 City
(Solapur) City. Sells 2nd hand DG (Pune). He sells Kirloskar and Cummins
set of Kirloskar, Cummins and between 7.5 KVA to 250 KVA. He does not
CAT. Enquiries for CAT rental deals in send hand DG market however rents
products also come. these machines and buys backs some 2nd hand
machine to drive sales
Understanding of Second hand DG market exists Successful second hand market exists in which Dealer is aware of the second hand market
2nd Hand and this dealer is an active demand comes from across the country however does not deals in the second hand DG
Market participant. Machines are procured (Mumbai, Calcutta). sets directly however through the buyback
then reconditioned and cold back model. Dealer however rents the machine.
at a competitive price. No service
warranty given.
2nd Hand Dealership deals in both buy back Dealer operates in the 2nd hand model - 1) Yearly 3-4 DG sets are acquired through the
Business Model and inventory model. Buy Back Procurement - Agents get machine leads and buyback model and sold back to the market
(if any) model is to drive sales. connect the customers (people who are selling mainly done to push new products. DG Rental
Procurement of DG sets takes old machines) to the dealers. Agents charge 2 % Market Dealers get lots of requirements for
place through agents who earn commission (Mumbai Agent Irfan DG rental. However these people are who need
commission. 90% of dealers/ 9892018735) 2) People usually sell these DG sets for 4-8 hours and need a vehicle
agents only do match making they machines due to 1) change in electric load, 2) mounted machine. This dealers does not deals
have no storage facility different needs 3) No warranty is provided on in those kind of machine. They rent machines
these products 4) Reconditioning is done for 1 month. Standard rate is 25000 (for 100
wherein necessary to get a better sale value KVA) for one month which will include
installation, delivery and movement back.
Rental model works pretty well in cities for
small usage.
Market Size Enquiry comes from pan India. 8-10 Enquiries are generated every month. Most 2nd hand DG enquiries happen all through the
For every 30 enquiry 1 set is sold. of the enquiries are for KVA<100. Demand year 8-10 enquires comes every month.
69
Daily 2-3 enquiries. Enquiries are comes from across the country especially
generally in the low KVA rating factories like - sugar, milk dairy, low budget
(<100 KVA). SME, construction
Margin/ Market Margin is 5% to 10% on every Margin in this business is unlimited based on
Dynamics machine. Margin depends on 1) bargaining power. Price points for a 100 KVA
bargaining power of seller 2) machine Cummins 1st hand machine INR 7.6
current condition of machine 3) lac. This machine underwent 660 hours of
reconditioning done running. After which this dealer bought it at 4.45
lac and sold it at 4.9 lac. 45000 was made on the
machine.
Scope for May not be Viable 1) Cummins If there is no problem with payment of excise 2nd Hand organized DG market would
Organized will standardize the process 2) duty in the second hand market this is a very definitely benefit the customers like in the case
Approach Certification would be introduced good model. Dealers will definitely be interested of Mahindra First Choice. However price of
- As a result price of machine goes in these machines. People will generally not the product will go up. Customers will get
up so the unorganized market prefer Mahindra or CAT machines but buying benefit through branding/ service warranty
might continue. Prices of the Cummins machines they will prefer
machine will have to be checked
Parameters Dealer Pune Dealer Pune Dealer Pune

Dealership C S Enterprise Pune Mr Rajendra GenPower Systems Mr Chitnis Sunil Ace (ace.genset@gmail.com)
Dande 9822096055 982316252
Customer Dealer says that price and brand both Decision is solely based on electrical 1) Usually customer has a fixed set of brands they
Profiles / are important parameters for buying load. Depending on the electrical load lowest price. Rural v/s Urban customers show less
Decision Making 2nd hand DG. All companies are on the the machine is selected. Usually brand consciousness. 2) All are price conscious.
Criteria same level for service warranty and Cummins has a high end costly product Exceptions based on quality (urban customers) 3)
other services therefore price & brand however the reliability of Cummins is Service Warranty medium important 4) Brand
become decision parameters. higher. Decisions can be based on trust Medium(Trust with dealers/ company is a
reliability also for critical industries- IT, built over the years ) 5) Financing Options
manufacturing where decision is solely Customer has funds and especially for second hand
based on reliability. In infra, realty with no financing option is needed
non-critical loads Kirloskar is often used
Online Presence Online Sales are an important medium today .Sales
happen 100% through olx and quikr. That is the
key chief marketing medium.
Dealership Dealer owns his dealership in Tier 1 Dealer owns his dealership in Tier 1 Dealer owns a dealership in Ties 1 City (Pune).
City (Pune). He sells Powerica Gensets City (Pune)
ranging from 15-250 KVA rating.
70
Understanding Dealer is aware of the second market Dealer is not aware of the second hand Dealer is aware of the second hand market
of 2nd Hand however does not deals in the inventory DG market nor does he participated in however sells the products only through buyback
Market model. Some of the transaction do take buy back model of machines even model.
place through the buyback model which though he knows about enquiries
is only limited only to push new
products.
2nd Hand He operates in the second hand DG Business Model for 2nd Hand DG- 1) Buy Back
Business Model market only through the buyback model to promote the current/ new customers to
(if any) model. Usually his customers are the buy products from the dealer 2) Last year they sold
small industries in Pune and the real nearly 4-5 second hand DG gensets 3) 100% of the
estate sector and the construction machines are acquired by Buy back model 4)
industry. Sales Channel - usually There is no specific storage unit for 2nd hand DG
through agents/ client relationship. genset so it sold as soon a buy back happens 5) It
Relationship is an important part of the leads to huge blockage of funds so not a very
business. Company does reconditioning favorable model 6) Large number of people
before the 2nd hand DG is sold in the inquire of DG gen sets however the model is
market. specification driven 7) Buy Back is important for
customer retention 8) They recondition the DG set
before selling them back
Market Size No of enquiries to buy second hand DG There are constant enquiry about 2nd Enquiries come all round the year . However
2-3 enquiries per month. No of hand DG product therefore there is enquiries are 1) specification based 2) customer is
buybacks till now in 2015 2 definitely demand however the dealer stiff about his needs
has no track of it.
Margin/ Market Buy Back Model is driven in order to Margins are unpredictable and varied.
Dynamics drive new sales. Ideally a DG can sit for
upto 3 years if it is not actively tried to
be sold in the market.
Scope for Problems in 2nd hand DG genset market 1)
Organized Spares have to be available for recon specifically
Approach for multi brand products 2) Overheads will be high
3) Buy back can be an applicable model 4) Multi
brand entry is only possible
Parameters Dealer Kurukshetra Dealer Mumbai Dealer Mumbai

Dealership Shyam Traders, Kurukshetra Sparko Electricals (Uday - 9969657542) SKL India - Rajeev Bhatia- 9819008647
(9896223901)
Customer Profiles 1. Local households and small industries Supplies to customers across the country. Customers (industrial) usually look at the
/ Decision Making for low KVA ratings. 2.) Customer is Main customer parameters include brand and brand and quality more than the price.
Criteria very price conscious and sometimes, price. For the second hand machines no Usually customer has set load
71
price is the sole criteria for buying the warranty is currently provided however the requirements as per which they make the
generator. 3.) Brand trust is not high and customers (if old) expect some sort of service choice
people do buy locally assembled support. Usually machines are sold to old
generators customers only
Online Presence Products are listed on olx and quikr Usually
leads that are generated in urban areas only
Dealership Tier 2 City - Kurukshetra Dealership is present in Tier 1 City - Mumbai Dealership in Tier -1 City Mumbai.
Supplier fulfils local demand only in Bhandup region. Supplies across the Products are sold in 100- 500 KVA.
country. 1st Hand product mainly includes 1 - Dealer does not deals in 2nd hand DG sets
500 KVA however for second hand usually
less than 500 KVA sold
Understanding of Dealer has a good knowledge of second Dealer has a very good understanding of the Dealer has idea about the second hand
2nd Hand Market hand DG market. He doesn't carry any second hand DG market and selling the market however does not practices it.
inventory and keeps a track of enquiries product through inventory and buy back Dealer mainly has industrial customers
and connects the buyer and seller models which do not usually buy 2nd hand DG
whenever required
2nd Hand 1.) Marketplace model wherein the Procures second hand machine through agents
Business Model (if dealer is just connecting the buyer and and sells them in the local area. Usually the
any) seller and getting a margin for the same demand comes from real estate/ construction
2.)Also working on Recon model sector. The dealer functions in both buy back
wherein the dealer is buying the old and inventory model. Sales are derived
genset, taking out engine and other through 1) agents 2) online media listings
working parts, replacing worn-out parts (recent opportunity)
with new ones and then selling it.
Market Size Enquiries are limited in number for 8- 10 enquiries per month from across the
Diesel generators and are generally met country
by the local sellers itself
Margin/ Market Margins are not fixed. Machines undergo
Dynamics reconditioning before being used. Therefore
prices are accordingly fixed. Approx 5- 10 %
Scope for In order to enter the second hand market Customers usually have specific
Organized Cummins will have to go or multi brand requirements before buying a DG set
Approach because a number of machines that are sold therefore if Cummins is able to provide
belong to Kirloskar. Price is a key criteria of that through an organized market it would
how customer chooses which product to be a good benefit for the customer. With
purchase and usually customer do not buy 2nd branding service quality will go up
hand in critical loads however prices will also go up
72
4. Dealer Interview Guide
Objectives: To develop an understanding on the following points pertaining to DG sets:
a) Market
1. How do you classify the market? KVA, Price, Usage hours etc.
2. What is the typical demand? Any seasonality?
3. What is the sales of different products?
4. Which areas do the demand come from and how much?
b) Customer Profiles
1. Who forms your customers in terms of industry and revenues?
2. For what purpose do they purchase the DG set?
3. What is the size of their order?
4. How many are repeat purchasers?
c) Customer Decision Parameters

1. What do the customers look for in the product?
i. Brand
ii. Price
iii. Service/Warranty
iv. Lead Time
v. Working Test
vi. Trust of dealer
vii. Variety/Choice
viii. Financing options Depreciation benefits
2. Who are the influencers/decision makers? Consultant, Themselves, Dealer
d) Business Model / Actions on Customer Parameters

1. What is your business model?
2. Where do you procure the DG sets from?
3. Do you perform any servicing/customization before selling it?
4. Do you provide any warranty/ guaranty?
e) Prospects of 2nd Hand DG Sets

1. What is your opinion about a major organized player like Cummins or Kirloskar
entering the 2nd hand DG set market? What will be your key concerns?
2. Do you sell second hand DG sets? If not, would you be interested in selling one?
(for 1st hand dealers only)
3. How does it fare in comparison with rent model?
73
5. Customers Interview Guide
Objective To understand the market for DGs from the viewpoint of customers
a) Business Model (For SMEs, Rentals and Business customers)
1. Where do you procure the DGs for your workplace?

2. Who are these agents from the agent network? Any specific profile of these agents?
3. How do these agents function?
4. Do these agents hold inventory? How do you manage inventory of DGs? (For rentals)
5. What channels do you use for procuring second hand DGs for your business?
b) Customer Decision Parameters
1. Select the top 3-4 parameters which you look for in a DG set?
i. Brand
ii. Price
iii. Service/Warranty
iv. Lead Time
v. Working Test
vi. Trust of dealer
vii. Variety/Choice
viii. Financing options Depreciation benefits
c) First hand vs. Second Hand

1. For what purpose will you prefer second hand DG set?
2. When do you prefer a second hand DG set over a first-hand one?
d) Organized player in market

1. What are your opinions on an organized player entering the market in this field?
2. According to you, what model of business will you prefer, a multi-brand model
where DGs of all brands are sold or a single brand model, where only
Cummins/Kirloskar DGs are sold?
74
6. Table 4 Summary of Customer Responses
Customer Details Line of Business Interview Details
Santosh (Decorator) - Decorator 1. Local Customers - Mostly Marriages, Parties and other
7506246987 functions
2. He procures second hand DGs on rent from rental dealers
in Kurla
3. Customers don't know specific requirements of DGs but
the decorator knows from experience so he gives the DGs to
customers himself
4. No extra charges on DGs. Approx rent the decorator pays
to the dealer is 9000 for 8 hours for a 16 KVA DG set
5. He gives customer the best deal in terms of price, and
mainly transactions happen due to good relationship with
the rental dealer and decorator
Falcon Diesel & Marine Generator Rental 1. 2nd hand DG buyer - Buys through agents, Margin to the
Works - 08377809604 Services agent 3- 5%, 2. Decision on price (mainly), brand name,
running hours, condition. 3. Branded products fetch good
price based on KA rating 5 lac to 8 lac depending on actual
price
Kurukshetra Nursing Medical 1. Focus is on brand and trust on dealer. 2. Equipment is for
Home (Dr. Subhash critical use and hence, no compromise is made on quality. 3.
Garg - +919416039397) They have replaced their DG thrice in last 10 years owing to
capacity expansion and each time, they purchased a new
Kirloskar DG
Aggarwal Nursing Medical 1. Hospital has affiliation to certain regulatory bodies and
Home (Sushil Bansal - hence, they change their DG after every 5 years or less 2.
+919812162231) Power outages are high and hence, dependence on DG is
high and critical. 3. Customer is brand conscious and ready to
pay a higher price. 4. A straight-forward No for second hand
DG
Himalayan Packaging Manufacturing 1. Loyal customer of Cummins who have purchased Cummins
Industries Pvt. Ltd. (SME) DG 6 times in last 7 years. 2. A new Cummins DG was
(Madan Solanki, purchased each time when a new division was opened or
Admin Dept. capacity expansion took place. 3. Decision was based on
+919927680036) trust and brand loyalty. 4. Not interested in second hand DG
Mr. Ramdas Lonkar Manufacturing 2nd hand DG buyer: 10 kVA, Kirloskar
Factory In-charge, (SME) Importance: Working Condition, Brand, Price
Sun Heat Transfer Ready to buy from organized if some kind of certification
Technologies Pvt. Ltd. provided, even at 10-15% extra price over un-organized
Pune dealer
Would like if service provided (also with extra fees)
Golani Brothers, 303 , Construction 1.) DG used at construction site for both critical and non-
Dalamal Chambers, Contractors (IIT critical load. For non-critical second hand DG set can be used
New Marine Lines, Bombay) 2.) Main issue with the second hand DG is reliability and high
Mumbai maintenance cost is the machine does not works fine. 3.)
Ready to buy from organized player is warranty is provided
4.) Warranty & Maintenance is a must
National Hiring (+(91)- Generator Rental 1. Buy second hand DGs through their dealer and agent
9953357120) Services network. 2. Provide only Cummins and Caterpillar Gensets
on rent. 3. Customer decision mainly on Pricing and services
offered
Venus Construction Construction 1. Need DGs for projects while starting. 2. For projects in
(+(91)-22-61620067) Contractors urban areas, where electricity is made available shortly, they
generally take rental DGs or second hand DG. 3. For areas
where electricity problem, they generally use a first-hand DG
for better quality and for them, it is a critical process then. 4.
75
Customer Decision Parameters - Warranty and Guarantee,
Working Condition, Price, Dealer Trust
Marco Gensets Pvt. Generator Rental 1. Procure through agents and dealer network and basically
Ltd. (08377805569) Services dealer relationships. (3-5 % Commission to agent). 2.
Customer decision based on pricing and services offered. 3.
Organized player entry would be good for customer trust. 4.
Multi-brand model preferred for them as they sell all
companies gensets
Brite Trans Power Generator 1. Procurement through their own dealer network and
(08046031371) Maintenance and agents. 2. For High KVA, Cummins Brand has more trust than
Rentals Kirloskar. 3. Customer decision parameters - Pricing, Brand
and Value added services offered. 4. Multi-brand model
better as easier procurement of gensets of various brands
under one roof for them
Surfing Point Pvt. Ltd, Small Office 1. Trusted dealer in Nashik with whom they have developed
Nashik business relations. 2. Local servicing - Dealer provides them
with low cost deals for maintenance. 3. Customer
parameters - Trust of dealer, Price, working condition, Brand.
4. Multi-brand model will be better for the customers.
Modern Hiring Generator Rental 1. Procurement through agent network. 2. Customer
(08041947528) Services decision parameters - Working condition, value added
services offered, Price. 4. Agents are freelancers who get
customers for them to initiate the relationship and it
continues the same. 5. Multi-brand model better then single
brand as their customers need multiple brands of DGs
Devgiri Offset Pvt. Ltd, Printing Solution 1. They need DG for backup purposes only. 2. They have a
Nashik SME trusted dealer, who also is their touch-point for service. 3.
Customer decision parameters - Price, Working condition,
dealer trust. 4. Multi-brand model preferred for more choice
Bardai Group of Generator Rental 1. Procure through own set of dealers and agent network. 2.
Companies Services Customer decision parameters - Working condition, Prices,
(09643318788) Value added services. 4. Multi-brand model better as variety
of second hand gensets required for their customers to have
a choice
Metro Engineering Generator Rental 1. Procure through own set of agents and dealers. 2. Have
Corporation (022- Services built agent network with agents (freelancers who work with
24222519) them project by project basis). 3. Customer Parameters -
Value added services, Working condition, Price, Brand. 4.
Multi-brand model better as more variety with trust
MCC Digital Pvt. Ltd, Small Office 1. For critical processes, they buy first hand from a dealer
Nashik with whom they have been dealing since a long time. 2. For
non-critical processes, second hand they can buy. 3.
Customer decision parameters - Dealer trust, requirement
for DG, Price, Brand. 4. Multi-brand model preferred - More
choice in buying for non-critical processes
Mastek Services Generator Rental 1. Procure with the help of dealer and agent network. 2.
(09699663353) Services Customer parameters - Price, Brand 3. Multi-brand model is
better as then they have more variety for the customers
Dynamic Engineering Generator Rental 1. Procurement through own agent and dealer network. 2.
(09899892756) Services Customer decision parameters - Price, Brand, value added
services. 3. Multi-brand model better for better variety for
consumers
Impressive Printing Solution 1. Have their trusted dealer whom they have been dealing
Impressions, Nashik SME with since a long time. 2. Customer parameters - Dealer
(9823622217) trust, Brand, Pricing. 3. Multi-brand model will be better for
76
the customers as they would have more variety. 4. The same
dealer looks after the service and maintenance needs
Me. Suresh Nair IT Company 1. Since use is critical, they buy only first DG sets. 2. Tenders
ex-GM (Admin) are floated out and admin department finalizes the DG based
TCS on the quotations received. 2. Customer decision parameters
- Brand, Specifications, Price.
Majid Ibrahim KPO 1. The equipment need to ensure error free supply to data
Asst Manager IT center and since use is critical, they buy only first DG sets
Infrastructure and from own dealer contacts 2. Customer decision parameters -
Security, Specifications, Brand, Price.
Fractal Analytics
77
Web References
http://www.caterpillar.com/en/company/strategy.html
http://in.reuters.com/finance/stocks/companyProfile?symbol=CAT.N
http://catused.cat.com/en/index.html
http://www.caterpillar.com/en/company/brands/cat-rental-store.html
http://company.naukri.com/caterpillar-india-jobs/contact-us.html
http://india.cat.com/parts-service/rental
http://www.tiplindia.in/cat/services/rental_index.htm
http://www.mahindra.com/News/Press-Releases/1403243282
http://www.mahindrafirstchoice.com/buy/city/showonly/fiat
http://www.mahindra.com/resources/CSR-2010-11-HTML/after-market.htm
http://www.franchiseindia.com/articles/Franchisee/Case-studies/Profit-driven-pre-owned-
car-franchise-biz-553/#.VGOqbcmHeBo
http://www.franchiseindia.com/articles/Opportunity/Case-studies/Pre-Owned-Cars-Drive-
Sales-229/#.VGOqcMmHeBo
http://olx.in/other-electronics/?t=generator
http://www.gujaratgenerators.com/
78

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TO DETERMINE THE FEASIBILITY FOR CUMMINS TO ENTER

THE DIESEL GENERATOR RESELLER MARKET

Ramneesh Singla (139278083)

Prof. Arti Kalro

for the coursework in

Shailesh J. Mehta School of Management

4. Scope for Organized Player

1.1.1 About Diesel Genset

Diesel Genset Parts

Image Source: http://www.beeindia.in/energy_managers_auditors/documents/guide_books/3Ch9.pdf

1.1.2 Genset Specifications

Application standby or prime power

Some of the key players in this industry are:

Company-wise presence in DG set market by rating:

1.2.1 Market Drivers

Long term Investment in infrastructure as per 12th Five Year Plan

Opportunities Power deficit of 4.2% in India

Some of the threats are as follows:

Low market liquidity to delay projects

Threats Weakening demand due to price rise led by CPCB II norms

Small diesel generators (15 - 75 kVA)

Commercial (Offices and other units)

Infrastructure (Construction of tunnels, bridges, roads etc.)

Residential (Individual buyers)

Units that rely on power produced by sets for part/full operations

Low installation cost

Shorter delivery periods

Suitable for poorer grades of diesel

1.3.2 Business Segments

1.3.3 Cummins Diesel Sales & Service India Ltd.

Cummins Product Mix:

1.4.2 Competitive Profile

Company Rating Range Dealer Network Service

KOEL 5 kVA 5200 kVA 400+ Sales Dealers

The figure below shows the tasks performed by OEMs:

Jakson Powerica Sudhir

Cummins holds a very symbiotic relationship with its OEMs.

1.4.4 Market Seasonality

0 200 400 600 800 1000

1.4.7 Product Segmentation

Geographically, the products can be segmented as follows:

West (140 hours per year)

1.4.8 Cummins Diesel Generator Market

1.4.9 Cummins and Second Hand Diesel Generator Market

2.3 Mahindra First Choice

2.3.2 Key Participants

2.3.3 Inventory Management

2.3.4 Maintenance and Value Added Services

2.3.6 Buy-Back Model

2.3.7 Financial Regulations

2.3.8 Sales Techniques

2.4.1 Business Model

2.4.3 Machine Procurement

Marketing & Customer

2.4.4 Customer Decision

2.4.6 Servicing Entity

3.3 Overall Market

Market Share of 2nd Hand DGs

3.4 2nd Hand Product Segment Mix - Cummins

3.5 Product Segment Mix 2nd Hand Market

Product Segment Mix

3.6 Geographical Analysis

3.7 Pricing Analysis