Traditionally known as a copier player, the past year has seen Canon transforming itself into a leading player in the areas of document management and imaging solutions. With a range of new products being introduced every quarter, aggressive advertising, and a change in the distribution strategy, the goal is to become a Rs 500 crore company by 2004, says Punita Jasrotia

Canon is trying to connect with the psyche of the end-customer as a consumer appliances product rather than just a IT peripheral company, says Alok Bharadwaj

When Canon India, a wholly-owned subsidiary of Canon Singapore, started operations in December 1997 in India with its copier business, the focus was limited to selling mid-range and high-end copiers targeted at the government, corporates, SME and SOHO segment. However, the company faced some stiff competition in the copier segment from Modi Xerox and RPG Ricoh in 1997. Midway, the company also introduced cameras. The company then decided to introduce more offerings and adopted a distribution model in 1999. In December that year, Canon introduced fax machines, printers and scanners that were distributed through national distributors.

Today, Canon India is synonymous with sophisticated high quality products spanning an entire range of documentation devices and imaging solutions, including bubble-jet printers, flat-bed scanners, photocopiers, multi-functional devices, facsimile machines and colour laser copiers. Headquartered at Delhi, the company has offices in eight cities across India and directly employs over 450 people. Strategic planning and focused activities have been at the core of Canon’s marketing processes. The company is looking at a 25 percent market share of the IT peripheral market by 2005.

Investing in the future
The company has also set up a software development centre and a digital technology lab at Delhi with an investment of $2 million. The software development centre is one of six such technology centres established by Canon globally that undertakes in-house development of software and complements outsourcing of software. The high-tech digital technology lab houses hardware to simulate network environments prevalent in business today in India. The digital lab will support network simulation, network application, trouble-shooting and help desk operations.

Canon has set up a specially designed customer service management system called ‘ServicEdge’ to provide responsive and proactive support to its customers in the office equipment segment. Created with an investment of over Rs 1 crore, it tracks all Canon business machines to help reduce breakdowns, reduces cycle time to fix issues, provides online status for operators and engineers and documents the customer history.

Besides this, the company has already established a central distribution centre in Noida near Delhi and a photocopier manufacturing facility production. Today, Canon India has a presence in the top 25 cities with four regional distributors and 1,100 dealers or channel partners. Besides this, it also 56 Canon Premium Partners (CPPs).

A look at the company’s performance in the past year reveals that Canon has slowly and consistently been growing to make its mark in the peripherals segment. And the strategy that has been the guiding force for Canon’s success is customer satisfaction. The company has been coming out with innovative and reliable products and services to satisfy customer needs. And aggressive branding exercises accompanied with a good sales support function has helped the company come out of its image of being just a copier company to becoming a critical player in the Indian peripherals segment.

However, it wasn’t an easy ride for Canon India—with tough competition to take care of, besides the grey market creating havoc. Though the year 2000 brought a sigh of relief for the company—as the increase in PC sales led to an increase in inkjet printer sales—the respite was short-lived. 2001 saw an increase in competition with aggressive price wars being fought in the inkjet arena. Besides this, the market slowdown proved to be a wet blanket. The company’s share in the inkjet market also decreased, with major players HP and Epson slashing prices of their entry-level models. It was then that the company decided to strengthen its business model and channel strategy to help it bounce back, and make a mark where other players were not focusing.

At the same time a lot of changes were brought in Canon’s top management—Alok Bharadwaj moved in as director & genenral manager of the Consumer Information & Imaging Division (CIID) for Canon India.

Turning around
2002 proved to be a critical year for Canon India, wherein a number of crucial decisions were made. The company realised that for a higher recall value, it needed to dwell deeper in its relationship with the end-customer. The first and the foremost task for Bharadwaj was to analyse how the printer market was moving. The dot matrix printer market was shrinking—government spending had reduced, besides technology was becoming obsolete—and inkjet and laser printers were accounting for a high growth in the printer market share.

But making a foray into the printer market was easier said than done, as traditionally the public perception has always associated HP with printers, while Canon was seen more as a maker of cameras and copiers. This meant an increase in capital investments for brand-building exercises.

Moreover, though the market for cameras and photocopiers was picking up, it was not growing considerably. The company felt the need to focus on sales, market and customer support, which would then establish a recall value both in terms of product offerings and quality. Hence, the business model was revamped, mainly to alter Canon’s marketing and distribution strategies. The company also chalked out a multi-pronged strategy to provide a connected digital solution to address the communication and automation needs of business establishments.

The company integrated its sales, marketing and customer support services by creating 10 new positions. While the initial five were posted as the business development managers looking after Delhi, Mumbai, Chennai, Kolkata and Pune, the other five were responsible for marketing programmes, product sales and marketing, support and co-ordination and consumer grievances.

There was also an increase in Canon’s Preferred Partners (CPP). “The whole purpose was to inspire confidence in our partners about our commitment and bring them closer to us,” says Bharadwaj.

Besides this, the company divided its business into Value and Volume business. With Value looking at niche sectors (like government and PSUs) with Canon’s high-end products, Volume further divided into CIID and the Office Systems & Solutions (OSS) volume products.

Says Bharadwaj, “There was a definite need to segregate and service our customers accordingly.” So, the CIID takes care of bigger clients and has segments like calculators, printers (both inkjet and laser), scanners and LSD projectors, whereas the OSS takes care of copiers, faxes and multifunctional printers (MFPs). The value business basically takes care of MFPs, network MFPs, colour copiers, colour laser printers and high-speed scanners. For a wider reach, Bharadwaj divided his focus areas into four categories.

The first and foremost decision was to make each senior manager responsible for his offerings. Secondly, more emphasis on ‘outreach programmes’, to reach out to the end-customer. This has been further categorised into Children, Adult and Corporates, with different programmes being run at each of these levels. For instance, at the Children level, Canon India has tied up with different schools for holding different imaging contests. “It not only helped us create a novelty around the product, but also has a good recall value,” says Bharadwaj. The company is expecting a four-fold growth in this segment. Third was corporate channel support, which needed to be promoted.

Fourth was the concentrated emphasis on PR activities “to highlight Canon as a complete digital imaging company.” “We are not just getting into news management or content building commodity operations, the purpose is to also work on opinion making for our products in the top cities where Canon is not perceived as a number one brand,” says Bharadwaj.

With its new strategy, Canon hopes to capture 20 percent of the fax machine market, from its current level of 6-7 percent, says Magesh S

Reaping benefits of the renewed focus
In 2001-02, CIID saw a growth of 10 percent of the total business (Rs 140 crore). And in 2002, it registered a 25 percent increase. Considering the kind of growth that is taking place, the division is planning to double its workforce to 150 people.

Touching base on almost all the product segments, the company has been very competitive in the past one year, with aggressive targets set to establish itself firmly on Indian soil.

In a major step towards convergence of channels, the Office Systems & Solutions (OSS) division of Canon India has tied up with IT resellers to sell fax machines and office automation equipment. Canon’s paper fax machines account for 75 percent of the fax market in India. “The market size for fax machines in India is about 95,000 units of which 55,000 units are plain paper faxes. With this new strategy, we hope to capture 20 percent from our current level of 6-7 percent, says Magesh S, marketing manager, Volume Products, OSS, Canon India.

Besides this, the company also brought in a considerable change in its distribution model, wherein it decided to opt out from its National Distribution strategy (with players like Compuage, Tech Pacific and Wellwin) to following a regional distribution model.

Regional distribution model
Explains Bharadwaj, “The need for such a model was that our field-sales and support people, and our extensive network of distributors, dealers, and other channel partners work closely with customers to determine the most appropriate, effective solutions to their needs. It requires that our products be readily available through our customers’ preferred source, be easy to order and configure, and be supported with prompt, efficient services that will optimise their usefulness. This was not happening with our national distributors. When a brand is just starting out, customers need to be given personal attention; but with established brands in their (national distributors’) kitty, it is difficult to give individual attention.”

Besides this, the company also appointed four regional managers, to look after effective and efficient penetration of Canon’s product portfolios. The efforts paid off as the model has spelt success for Canon India, especially in the inkjet printer market. “The purpose of appointing regional managers besides regional distributors was to provide customers with utmost support service. This has also helped us in understanding market requirements and local needs, which in turn helps us give better service, penetrate deeper and also take care of our dealers,” he adds.

Present focus
While Canon’s focus until now was more on establishing the brand, 2003 will see the company stressing more on getting volumes.

In case of the value business, in the past one year the company has started aggressively targeting government departments. And considering the increased activity in the e-governance arena, the plan is to roll out some new programmes on this front. The main product focus would be high-end printers (consisting of colour inkjet printers and laser printers) as that’s where the company has a competitive edge.

Lakshmi Narayan Rao, Canon’s marketing manager for value products identifies six zones that it would be aggressively targeting. These are—office zones (looking at large, small and SMEs), Print-on-Demand (which will see an increase in colour printers), transactional printing (more of billing printing), DMS (direct marketing services), usage in graphic arts and for CAD/GIS solutions (basic platter applications).

Defence is another segment, where the need for instant printing is quite high and that’s where the company is looking at targeting their laser printers. “In case of digital cameras, we would be targeting the election commission and licensing authority and educational institutions, where a lot of demand is coming from,” says Rao. Besides this, the company is expecting a lot of demand from system integrators and software companies. With more digital convergence happening, Rao is looking at a 100 percent growth next year.

Future market drivers
Bharadwaj pens digital cameras to be one of the critical market drivers in the future. Introduced late last year, the company has unveiled a slew of digital cameras and video camcorders for home and professional use. According to him, the Indian digital photography market is growing at over 77 percent per year and is expected to grow from 30,000 units in March 2002 to 54,000 units this year. Canon is targeting a market share of 20 percent of the Indian digital camera market this year.

To counter the competition from Kodak and Sony with a market share of 50 percent and 20 percent respectively, the company is planning to introduce 12 digital cameras in the market. Bharadwaj says the purpose is to connect with the psyche of the end-customer as a consumer appliances product than just being an IT peripherals company. Canon’s entry-level digital cameras cost between Rs 15,000-Rs 18,000 with other models selling for between Rs 30,000 and Rs 70,000. Cameras for professional users cost between Rs 2 lakh to Rs 5.4 lakh.

Laxmi Narayan Rao says there is a lot of demand for digital cameras from the election commission, licensing authorities and educational institutions

With this, the company is also introducing related products like photo ink, photo paper and printers. “Cameras just form a part of photography and we are looking at media and other components in digital photography to increase revenue. The idea is to help individuals print pictures directly from digital cameras at home,” says Bharadwaj. And that’s what the company has been promoting through its digital labs at home. Supplementing this, it has launched printers, which will come with photo quality ink and can print borderless photographs.

In case of inkjet printers, the company is looking at selling 1,00,000 units by this year. The company does not expect an increase in demand, however it is looking at 10 percent growth in this segment.

In the case of laser printers, the company is expecting a 20 percent growth this year, with the office segment driving demand. Also, with collaboration happening with copiers (which are becoming more digital copiers), there would be more multi-functional devices, which would be coming in.

In spite of being a relatively new player (making an entry in late 2000), the company has been able to fetch a considerable share in the scanner segment also. With its immediate competitors being Umax and HP, the company is looking at a 20 percent growth in this segment. Considering the increasing demand coming from the SOHO and the home segment for scanners, the company last year launched a promotional campaign targeted directly at the end-user, which helped the company carve a niche for itself.

Besides this, the company is targeting home users through its nine retail showrooms across the country. The purpose, besides gaining volumes, is to also have brand recall value as a good quality product.

IT retailing is another area that the company will continue to focus on. To effectively tap the SOHO market for its IT imaging products, the company will be laying an extensive thrust on retailing. Bharadwaj believes that due to emerging consumerism there is a lot of scope for these retail outlets through which they can sell printers, scanners and digital cameras. For this, the company is in the process of appointing retail managers to look after these office automation retail chains.

Besides this, MFPs have helped give Canon a distinctive image. With the technology changing and the consumer becoming smarter, the idea is to give him a product that takes care of his immediate requirements. Considering this, the company had already started offering Multi-Functional Printers that can double up as a copier, a facsimile machine or a document scanner.

While earlier the high price deterred acceptability of these machines in the Indian market, the reduction in prices is expected to drive growth in the coming months. A Gartner study showed that sales of MFPs grew by 98 percent in the first quarter of 2002 as compared to 2001. And going by market statistics this segment is only expected to go up, with demand not just limited to the office segment, but home PC owners as well. The other players in the market are HP and Samsung with their entry-level prices.
In a bid to increase market share, the company has allocated a promotional budget of Rs 5 crore, where MFDs, branded ImageCLASS, are targeted at SMEs.

“In case of MFDs, our immediate competitors are HP and Samsung. Right now our market share is 20 percent and by 2006, we are looking at a business excess of 90 percent. This is quite considerable as we entered the market only in the 2001, where the share has moved from 0-25 percent,” says Bharadwaj.

With strategies already chalked out it remains to be seen how soon the company would be able to achieve it goals.